QUARTZ MOUNTAIN RESOURCES LTD.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2011, 2010 AND 2009

(Expressed in United States Dollars, unless otherwise
stated)

---





INDEPENDENT AUDITORS' REPORT



To the Shareholders ofQuartz Mountain Resources Ltd.

We have audited the accompanying consolidated financial
statements of Quartz Mountain Resources Ltd. which comprise the consolidated
balance sheets as at July 31, 2011 and 2010 and the consolidated statements of
operations and comprehensive loss, shareholders equity and cash flows for the
years ended, July 31, 2011, 2010 and 2009 and a summary of significant
accounting policies and other explanatory information.

Managements Responsibility for the Consolidated
Financial Statements

Management is responsible for the preparation and fair
presentation of these consolidated financial statements in accordance with
Canadian generally accepted accounting principles, and for such internal control
as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to
fraud or error.

Auditors Responsibility

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

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

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

Opinion

In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of Quartz Mountain
Resources Ltd. as at July 31, 2011 and 2010 and the results of its operations
and its cash flows for the years ended July 31, 2011, 2010 and 2009 in
accordance with Canadian generally accepted accounting principles.

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 1 in
the consolidated financial statements which describes conditions and matters
that indicate the existence of a material uncertainty that may cast significant
doubt about the ability of Quartz Mountain Resources Ltd. to continue as a going
concern.

DAVIDSON & COMPANY LLP

|Vancouver, Canada | Chartered Accountants
|----------------- | ---------------------

October 6, 2011

---

QUARTZ MOUNTAIN RESOURCES LTD.Consolidated
Balance Sheets
  (Expressed in United States Dollars)

|                                         |   | July
      31 |   |   | July
      31 |  
|---------------------------------------- | - | ------------- | - | - | ------------- | -
|                                         |   | 2011          |   |   | 2010          |  
|                                         |   |               |   |   |               |  
|ASSETS                                   |   |               |   |   |               |  
|                                         |   |               |   |   |               |  
|Current assets                           |   |               |   |   |               |  
|Cash and cash equivalents                | $ | 82,315        |   | $ | 251,240       |  
|Amounts
      receivable and prepaids    |   | 21,380        |   |   | 12,873        |  
|                                         |   | 103,695       |   |   | 264,113       |  
|                                         |   |               |   |   |               |  
|Mineral property interests(note 5)       |   | 1             |   |   | 1             |  
|.                                        |   |               |   |   |               |  
|                                         | $ | 103,696       |   | $ | 264,114       |  
|                                         |   |               |   |   |               |  
|LIABILITIES AND SHAREHOLDERS' EQUITY     |   |               |   |   |               |  
|                                         |   |               |   |   |               |  
|Current liabilities                      |   |               |   |   |               |  
|Accounts payable and accrued liabilities | $ | 40,833        |   | $ | 20,000        |  
|Amounts due to a related party (note 7)  |   | 3,293         |   |   | 9,864         |  
|                                         |   | 44,126        |   |   | 29,864        |  
|                                         |   |               |   |   |               |  
|Shareholders' equity                     |   |               |   |   |               |  
|Share capital (note 6)                   |   | 21,269,046    |   |   | 21,269,046    |  
|Accumulated
      deficit                |   | (21,209,476   | ) |   | (21,034,796   | )
|                                         |   | 59,570        |   |   | 234,250       |  
|                                         |   |               |   |   |               |  
|                                         | $ | 103,696       |   | $ | 264,114       |  

Nature and continuance of operations (note 1)
  Subsequent events (note 11)

Approved by the Board of Directors:

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

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

---

QUARTZ MOUNTAIN RESOURCES LTD.Consolidated
Statements of Operations and Comprehensive Loss
  (Expressed in United States Dollars, except for weighted average number of common
  shares outstanding)

|                                                     |   | Years Ended July 31 |  
|---------------------------------------------------- | - | ------------------- | -
|                                                     |   | 2011                |  
|                                                     |   |                     |  
|Expenses                                             |   |                     |  
|Foreign exchange (gain) loss                         | $ | (9,411              | )
|Interest income                                      |   | (1,597              | )
|Legal, accounting and audit                          |   | 55,172              |  
|Mineral property investigations                      |   |                    |  
|Office and administration                            |   | 92,136              |  
|Regulatory, trust and filing                         |   | 36,390              |  
|Shareholder communication                            |   | 1,990               |  
|                                                     |   |                     |  
|Loss and comprehensive loss for the year             | $ | 174,680             |  
|                                                     |   |                     |  
|Basic and diluted loss per common share              | $ | 0.01                |  
|                                                     |   |                     |  
|Weighted average number of common shares outstanding |   | 13,399,426          |  

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

---

QUARTZMOUNTAINRESOURCESLTD.ConsolidatedStatementsofShareholders'Equity
  (Expressed in United States Dollars, except for number of shares)

|                                         |  | Years Ended July 31 | 
|---------------------------------------- |  | ------------------- | 
|                                         |  | 2011                | 
|                                         |  |                     | 
|                                         |  | Number of           | 
|Share capital                            |  | shares              | 
|Balance at beginning and end of the year |  | 13,399,426          | 
|                                         |  |                     | 
|Accumulated deficit                      |  |                     | 
|Balance at beginning of the year         |  |                     | 
|Loss for the year                        |  |                     | 
|Balance at end of the year               |  |                     | 
|                                         |  |                     | 
|TOTAL SHAREHOLDERS' EQUITY               |  |                     | 

Theaccompanyingnotes are anintegralpart of theseconsolidatedfinancialstatements.

---

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

|                                              |   | Years Ended July 31 |  
|--------------------------------------------- | - | ------------------- | -
|                                              |   | 2011                |  
|                                              |   |                     |  
|Cash flows from operating activities          |   |                     |  
|Loss for the year                             | $ | (174,680            | )
|Changes in non-cash working capital items:    |   |                     |  
|Amounts receivable
      and prepaids         |   | (8,507              | )
|Accounts payable and accrued liabilities      |   | 20,833              |  
|Amounts due to and from related
      parties |   | (6,571              | )
|Cash used in operating
      activities       |   | (168,925            | )
|                                              |   |                     |  
|Decrease in cash and cash equivalents         |   | (168,925            | )
|Cash and cash equivalents, beginning of year  |   | 251,240             |  
|Cash and cash equivalents,
      end of year  | $ | 82,315              |  
|                                              |   |                     |  
|                                              |   |                     |  
|Supplemental disclosure:                      |   |                     |  
|Interest paid during the year                 | $ |                    |  
|Income taxes paid during the year             | $ |                    |  

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

---

|QUARTZ MOUNTAIN RESOURCES LTD.                               
|-------------------------------------------------------------
|Notes to the Consolidated Financial Statements               
|For the years ended July 31, 2011, 2010 and 2009             
|(Expressed in United States Dollars, unless otherwise stated)

|1. | NATURE OF OPERATIONS AND GOING CONCERN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Quartz Mountain Resources Ltd. ("Quartz" or 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 on a going concern basis under the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather
than through a process of forced liquidation. Several adverse conditions cast doubt upon the validity of this assumption. The Company has no operating revenues and is, therefore, unable to self-finance operations, and continues to have cash flow
requirements to finance operating expenses. As at July 31, 2011, the Company did not have sufficient capital to finance any proposed mineral property acquisition or exploration program. Management continues to review acquisition opportunities which
will require a concurrent financing. While the Company has been successful in the past, there can be no assurance that it will be able to complete an acquisition and obtain financing in the future.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | These consolidated financial statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The continuing
operations of the Company are dependent upon its ability to complete an acquisition of a mineral property interest, including a concurrent financing, continue to receive financial support through the exploration stage, and commence profitable
operations in the future, all of which are uncertain.                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | These consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and are presented in United States Dollars ("USD"). A reconciliation of these consolidated
financial statements from Canadian GAAP to United States GAAP has been disclosed in note 10.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | These consolidated financial statements include the accounts of Quartz Mountain Resources Ltd and its subsidiaries. All material intercompany balances and transactions have been eliminated upon consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Certain of the prior year's comparative figures have been reclassified to conform to the financial statement presentation adopted for the current year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|3. | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|(a) | Cash and cash equivalents                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                         
|    | Cash and cash equivalents consists of cash held by financial institutions and highly liquid investments having maturity dates of three months or less from the date of purchase, which are readily convertible to known amounts of
cash.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2011, 2010 and 2009                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|(b) | Mineral property interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Mineral property acquisition costs, and exploration and development expenditures incurred subsequent to the determination of the feasibility of mining operations, are capitalized until the property to which they relate is placed
into production, sold, allowed to lapse or abandoned. Mineral property acquisition costs include the cash consideration and the estimated fair value of common shares and warrants issued for mineral property interests, pursuant to the terms of the
relevant agreement. These costs are amortized over the estimated life of the property following commencement of commercial production, or written off if the property is sold, allowed to lapse or abandoned, or when an impairment in value has been
determined to have occurred.
Exploration expenses incurred prior to determination of the feasibility of mining operations, including periodic option payments and administrative expenditures are expensed as incurred.
The Company reviews its
  long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(c) | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition,
construction, development and/or normal use of the assets. The Company also records a corresponding asset value which is amortized over the remaining service life of the asset being retired. Subsequent to the initial measurement of the asset
retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying the obligation (asset retirement cost).                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company also reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount
by which the carrying amount of the asset exceeds the fair value of the asset.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company had no material asset retirement obligations as at July 31, 2011 and 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(d) | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company considers its functional currency to be the United States Dollar.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Monetary assets and liabilities of the Company and its integrated foreign operations are translated into United States Dollars at exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are
translated at historical exchange rates unless such items are carried at market, in which case they are translated at the exchange rates in effect on the balance sheet date. Revenues and expenses, except amortization, are translated at the average
exchange rates for the period. Amortization is translated at the same exchange rate as the assets to which it relates. Gains or losses on translation are recorded in the statement of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                             

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2011, 2010 and 2009                   
|(Expressed in United
      States Dollars, unless otherwise stated)

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

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2011, 2010 and 2009                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|(i) | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The preparation of consolidated financial statements in
      conformity with Canadian generally accepted accounting principles requires
      management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and the disclosure of contingent assets
      and liabilities as at the balance sheet date and the reported amounts of
      revenue and expenses during the reporting period. Significant areas
      requiring the use of management estimates include the determination of
      potential impairment of asset values, and the assumptions used in
      determining the fair value of non-cash stock-based compensation. Actual
      results could differ from those estimates.           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(j) | Segment disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Company currently operates in a single segment  the
      acquisition and exploration of mineral properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(k) | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | All financial instruments are classified into one of the
      following five categories: held for trading, held-to-maturity, loans and
      receivables, available-for-sale financial assets, or other financial
      liabilities. Subsequent measurement and recognition of changes in the
      value of financial instruments depends on their initial
    classification:                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Company has classified its financial instruments as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(l) | Comprehensive income (loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Comprehensive income is the change in the Company's
      shareholders' equity that results from transactions and other events from
      other than the Company's shareholders and includes items
  that would not normally be included in net earnings (loss),
      such as unrealized gains or losses on available-for-sale investments.
      Certain gains and losses that would otherwise be recorded as part of net
      earnings are presented in other "comprehensive income" until it is
      considered appropriate to recognize into net earnings. As at July 31, 2011
      and 2010, the Company had no accumulated other comprehensive income. For
      the years ended July 31, 2011, 2010 and 2009, comprehensive loss equals
net loss.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2011, 2010 and 2009                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|4. | CHANGES IN ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | International Financial Reporting Standards
      ("IFRS")                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | In February 2008, the Canadian Accounting Standards Board
      announced that 2011 would be the changeover date for publicly-listed
      companies to use IFRS, replacing existing Canadian GAAP. The transition
      date is for interim and annual financial statements relating to fiscal
      years beginning on or after January 1, 2011, although early adoption was
      permitted. Due to the Company's July 31stfiscal year, the
      mandatory transition date for the Company is August 1, 2011 with the
      restatement of amounts reported by the Company for the year ended July 31,
      2011 for comparative purposes.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|5. | MINERAL PROPERTY
INTERESTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| |                       |   | July 31, |  |   | July 31, | 
| | --------------------- | - | -------- |  | - | -------- | 
| |                       |   | 2011     |  |   | 2010     | 
| | Angel's Camp Property |   |          |  |   |          | 
| | Net smelter royalty   | $ | 1        |  | $ | 1        | 

|   | Angel's Camp Property  Oregon, USA                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | During the year ended July 31, 2002, the Company sold
      100% of its title, rights and interest in the Angel's Camp property
      located in Lake County, Oregon to Seabridge Resources Inc. ("Seabridge"),
      which later changed its name to Seabridge Gold Inc., for 300,000 common
      shares of Seabridge (sold in prior years), 200,000 common share purchase
      warrants of Seabridge (exercised and sold in prior years), cash of
      $100,000, and a 1% net smelter return royalty payable to the Company on
      any production from the Angel's Camp property. In 2003, Seabridge optioned
      a 50% interest in the property to Quincy Gold Inc., which later changed
      its name to Golden Predator Mines Inc., then to Golden Predator Royalty
      & Development Corporation, and is now named Golden Predator
      Corporation.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|6. | SHARE CAPITAL                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|(a) | Authorized share capital                                                                                                                                                             
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                      
|    | The Company's authorized share capital consists of an
      unlimited number of common shares without par value, and an unlimited
      number of preferred shares without par value.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2011, 2010 and 2009                   
|(Expressed in United
      States Dollars, unless otherwise stated)

(b)        Issued and outstanding
  share capital

| |                                      |  | Number of  |  |   |            | 
| | ------------------------------------ |  | ---------- |  | - | ---------- | 
| | Common shares
      issued           |  | Shares     |  |   | Amount     | 
| | Balance as at July 31, 2011 and 2010 |  | 13,399,426 |  | $ | 21,269,046 | 

|    | There were no preferred shares issued or outstanding
      during any of the periods presented.                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(c) | Share purchase options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Company's Share Purchase Option Plan allows the
      Company to grant up to 10% of the issued and outstanding shares of the
      Company at any one time, typically vesting over two years, subject to
      regulatory terms and approval, to its directors, employees, officers, and
      consultants. The exercise price of each option may be set equal to or
      greater than the closing market price of the common shares on the day
      prior to the date of the grant of the option, less any allowable
      discounts.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | As at July 31, 2011, no share purchase options had been
      granted under the Company's Share Purchase Option Plan. Accordingly, there
      were no stock options outstanding as at July 31, 2011, 2010, and 2009 or
      any stock option activity during any of the periods
  presented.                                                                                                                                                                                                                                              

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

| | Amounts due to a related party |   | As
      at July 31, | 
| | ------------------------------ | - | -------------------- | 
| |                                |   | 2011                 | 
| | Hunter Dickinson Services Inc. | $ | 3,293                | 

| | Related party transactions                       |   | Years ended July 31, | 
| | ------------------------------------------------ | - | -------------------- | 
| |                                                  |   | 2011                 | 
| | Services rendered by and expenses reimbursed to: |   |                      | 
| | Hunter Dickinson Services Inc.                   | $ | 94,072               | 

Hunter Dickinson Services Inc. ("HDSI")
is a private company which provides geological, corporate development,
administrative and management services to, and incurs third party costs on
behalf of the Company and its subsidiaries based on annually agreed and set
rates.

Services rendered by and expenses
reimbursed to HDSI for the years ended July 31, 2011, 2010 and 2009 relate to
travel expenses and office and administration services. For the year ended July
31, 2009, geological consulting services for property investigation activities
were also provided.

Transactions with HDSI are measured based on their exchange
  amounts.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2011, 2010 and 2009                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|8. | CAPITAL MANAGEMENT AND FINANCIAL
  INSTRUMENTS
|-- | ----------------------------------------------

|(a) | Capital Management Objectives                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The Company's primary objectives when managing capital
      are to safeguard the Company's ability to continue as a going concern, so
      that it can continue to provide returns for shareholders, and to have
      sufficient funds on hand for business opportunities as they arise. The
      Company considers the components of shareholders' equity as capital. The
      Company manages its capital structure and makes adjustments to it in light
      of changes in economic conditions and the risk characteristics of the
      underlying assets. As at July 31, 2011 the Company is not subject to any
      externally-imposed capital requirements.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The Company's investment policy is to invest its cash in
      highly liquid short-term interest-bearing investments, having maturity
      dates of three months or less from the date of acquisition, that are
      readily convertible to known amounts of cash.                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | There were no changes to the Company's approach to
      capital management during the year ended July 31, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(b) | Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The fair value of a financial instrument is the price at
      which a party would accept the rights and/or obligations of the financial
      instrument from an independent third party. Given the varying influencing
      factors, the reported fair values are only indicators of the prices that
      may actually be realized for these financial instruments.                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Financial instruments measured at fair value are
      classified into one of three levels in the fair value hierarchy according
      to the relative reliability of the inputs used to estimate the fair
      values. The three levels of the fair value hierarchy
are:                                                                                                                                                                                                                                                                                                                                                                                               

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

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

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

The following table illustrates the
classification of the Company's financial instruments recorded at fair value
within the fair value hierarchy as at July 31, 2011:

Financial assets at fair value:

| |                                            |   |               |  |   |               |  |   |               |  |   | July 31, | 
| | ------------------------------------------ | - | ------------- |  | - | ------------- |  | - | ------------- |  | - | -------- | 
| |                                            |   | Level
      1 |  |   | Level
      2 |  |   | Level
      3 |  |   | 2011     | 
| | Cash and cash equivalents                  | $ | 82,315        |  | $ |              |  | $ |              |  | $ | 82,315   | 
| | Total financial
      assets at fair value | $ | 82,315        |  | $ |              |  | $ |              |  | $ | 82,315   | 

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2011, 2010 and 2009                   
|(Expressed in United
      States Dollars, unless otherwise stated)

The following table illustrates the
classification of the Company's financial instruments recorded at fair value
within the fair value hierarchy as at July 31, 2010:

| | Financial assets at fair value:      |   |               |  |   |               |  |   |               |  |   |          | 
| | ------------------------------------ | - | ------------- |  | - | ------------- |  | - | ------------- |  | - | -------- | 
| |                                      |   |               |  |   |               |  |   |               |  |   | July 31, | 
| |                                      |   | Level
      1 |  |   | Level
      2 |  |   | Level
      3 |  |   | 2010     | 
| | Cash and cash
      equivalents      | $ | 251,240       |  | $ |              |  | $ |              |  | $ | 251,240  | 
| | Total financial assets at fair value | $ | 251,240       |  | $ |              |  | $ |              |  | $ | 251,240  | 

|    | The carrying amounts of the Company's cash and cash
      equivalents, amounts receivable, amounts due to a related party, and
      accounts payable and accrued liabilities approximate their fair
    values.                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(c) | Financial Instrument Risk Exposure and Risk
      Management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Company is exposed in varying degrees to a variety of
      financial instrument-related risks. The Board approves and monitors the
      risk management processes, inclusive of documented treasury policies,
      counterparty limits, and controlling and reporting structures. The types
      of risk exposure and the way in which such exposures are managed are
      provided as follows:                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Credit risk is the risk of potential loss to the Company
      if a counterparty to a financial instrument fails to meet its contractual
      obligations. The Company's credit risk is primarily attributable to its
      liquid financial assets, including cash and cash equivalents and accounts
      receivable. The Company limits the exposure to credit risk by only
      investing its cash and cash equivalents with high credit quality financial
      institutions. The carrying value of the Company's cash and cash
      equivalents and amounts receivable represent the maximum exposure to
      credit risk.                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Liquidity risk is the risk that the Company will not be
      able to meet its financial obligations when they become due. The Company
      ensures, as far as reasonably possible, it will have sufficient capital in
      order to meet short-term business requirements, after taking into account
      cash flows from operations and the Company's holdings of cash and cash
      equivalents. The Company's cash and cash equivalents are invested in
      business accounts, which are available on demand for the Company's
      programs.                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Company is exposed to foreign exchange risk as its
      operating expenses are primarily incurred in Canadian Dollars ("CAD"). The
      results of the Company's operations are subject to currency transaction
      risk and currency translation risk. The operating results and financial
      position of the Company are reported in USD in the Company's consolidated
      financial statements. The fluctuation of the CAD in relation to the USD
      will consequently have an impact upon the losses incurred by the Company
      and may also affect the value of the Company's assets and the amount of
      shareholders' equity.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2011, 2010 and 2009                   
|(Expressed in United
      States Dollars, unless otherwise stated)

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

The exposure of the Company's cash and
cash equivalents, and amounts receivable to foreign exchange risk is as
follows:

| |                           |   | July
      31, 2011 |  |   | July
      31, 2010 | 
| | ------------------------- | - | ------------------- |  | - | ------------------- | 
| |                           |   | Amount in           |  |   | Amount in           | 
| |                           |   | CAD                 |  |   | USD                 | 
| |                           |   |                     |  |   |                     | 
| | Cash and cash equivalents | $ | 76,221              |  | $ | 79,770              | 
| | Amounts receivable        |   | 17,744              |  |   | 18,570              | 
| | Total financial assets    | $ | 93,965              |  | $ | 98,340              | 

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

| |                                          |   | July
      31, 2011 |  |   | July
      31, 2010 | 
| | ---------------------------------------- | - | ------------------- |  | - | ------------------- | 
| |                                          |   | Amount in           |  |   | Amount in           | 
| |                                          |   | CAD                 |  |   | USD                 | 
| |                                          |   |                     |  |   |                     | 
| | Accounts payable and accrued liabilities | $ | 39,017              |  | $ | 40,833              | 
| | Amounts due to a related
      party     |   | 3,146               |  |   | 3,293               | 
| | Total financial liabilities              | $ | 42,163              |  | $ | 44,126              | 

The following significant exchange
rates were applied during the year:

| |                                                |  | Years
      ended July 31, | 
| | ---------------------------------------------- |  | -------------------------- | 
| | United States dollar
      per Canadian dollar |  | 2011                       | 
| | Average rate for the year                      |  | 0.9941                     | 
| | Closing rate July
      31                     |  | 0.9555                     | 

|   | (iv)      Interest Rate
      Risk                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company is subject to interest rate risk with respect
      to its investments in cash and cash equivalents. The Company's policy is
      to invest cash at fixed rates of interest, and maintain cash reserves in
      order to maintain liquidity, while achieving a satisfactory return for
      shareholders. Fluctuations in interest rates when the cash and cash
      equivalents mature impact interest income earned.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                       
|9. | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | At July 31, 2011, the Company had estimated income tax
      losses available for application against future years' taxable income of
      approximately $53,000 (2010  $56,000) in the United States which, if
      unused, will expire between fiscal years ending 2012 and 2021.                                                                                                                                                

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2011, 2010 and 2009                   
|(Expressed in United
      States Dollars, unless otherwise stated)

The Company has tax losses in Canada of approximately
      $1,614,000 (2010  $1,323,000), which if unused, will expire between
      fiscal years 2012 and 2031. The Company also has
resource allowance expenditures and capital
asset deductions of approximately $3,809,000 (2010  $3,539,000) and $119,000
(2010  $100,000), respectively, which carry forward indefinitely. Because of
the uncertainty regarding the Company's ability to utilize these amounts in
future years, a valuation 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 27.33% (2010  29.12%) with reported taxes is as
follows:

| |                                        |   | Years
      ended July 31, |  
| | -------------------------------------- | - | -------------------------- | -
| | Income tax expense                     |   | 2011                       |  
| |                                        |   |                            |  
| | Loss before income taxes               | $ | (174,680                   | )
| |                                        |   |                            |  
| | Income tax recovery at statutory rates |   | (48,000                    | )
| | Permanent differences                  |   | (3,000                     | )
| | Change in future tax rate              |   |                           |  
| | Statutory rate differential            |   | 14,000                     |  
| | Foreign exchange                       |   | (106,000                   | )
| | Change in valuation allowance          |   | 140,000                    |  
| | Losses expired                         |   | 1,000                      |  
| | Non-deductible items                   |   | 2,000                      |  
| | Net income taxes (recovery)            | $ |                           |  

Amounts of future tax assets and
liabilities are as follows:

| |                                         |   | As at
      July 31, |  
| | --------------------------------------- | - | -------------------- | -
| | Future tax assets
      and liabilities |   | 2011                 |  
| | Losses carried forward  Canada         | $ | 404,000              |  
| | Losses carried forward  United States  |   | 18,000               |  
| | Resource allowance                      |   | 952,000              |  
| | Property and equipment                  |   | 30,000               |  
| |                                         |   | 1,404,000            |  
| | Valuation allowance                     |   | (1,404,000           | )
| | Future income tax asset (liability)     | $ |                     |  

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2011, 2010 and 2009                   
|(Expressed in United
      States Dollars, unless otherwise stated)

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

| |                                                                                         |   | Years
      ended July 31 |  
| | --------------------------------------------------------------------------------------- | - | ------------------------- | -
| |                                                                                         |   | 2011                      |  
| | Loss for the year, Canadian GAAP and US GAAP                                            | $ | (174,680                  | )
| | Basic and diluted loss per common share, Canadian and US
      GAAP                     | $ | (0.01                     | )
| | Weighted average shares outstanding, basic and diluted,
      Canadian GAAP and US GAAP |   | 13,399,426                |  

Consolidated balance sheets

| |                                                       |   | As at               |   |   | As at               |  
| | ----------------------------------------------------- | - | ------------------- | - | - | ------------------- | -
| |                                                       |   | July
      31, 2011 |   |   | July
      31, 2010 |  
| |                                                       |   |                     |   |   |                     |  
| | Total assets, Canadian GAAP                           | $ | 103,696             |   | $ | 264,114             |  
| | Mineral property
      interests expensed per US GAAP |   | (1                  | ) |   | (1                  | )
| | Total assets  US GAAP                                | $ | 103,695             |   | $ | 264,113             |  
| |                                                       |   |                     |   |   |                     |  
| | Current liabilities, Canadian GAAP and US GAAP        | $ | 44,126              |   | $ | 29,864              |  
| |                                                       |   |                     |   |   |                     |  
| | Shareholders' equity, Canadian GAAP                   |   | 59,570              |   |   | 234,250             |  
| | Mineral property
      interests                      |   | (1                  | ) |   | (1                  | )
| | Shareholders' equity, US GAAP                         |   | 59,569              |   |   | 234,249             |  
| |                                                       |   |                     |   |   |                     |  
| | Total liabilities and shareholders' equity, US GAAP   | $ | 103,695             |   | $ | 264,113             |  

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2011, 2010 and 2009                   
|(Expressed in United
      States Dollars, unless otherwise stated)

Consolidated statements of cash
flows

| |                                                                     |   | Years
      ended July 31, |  
| | ------------------------------------------------------------------- | - | -------------------------- | -
| |                                                                     |   | 2011                       |  
| |                                                                     |   |                            |  
| | Cash flows used in operating activities, Canadian and US
      GAAP | $ | (168,925                   | )
| |                                                                     |   |                            |  
| | Decrease in cash and cash equivalents during
      the year         |   | (168,925                   | )
| | Cash and cash equivalents,
      beginning of year                  |   | 251,240                    |  
| | Cash and cash equivalents, end of year                              | $ | 82,315                     |  

|(a) | Mineral properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Under Canadian GAAP, the Company accounts for mineral
      properties as described in note 3(b).
      Under US GAAP, costs of acquiring
        mining properties are capitalized upon acquisition. Mine development costs
        incurred either to develop new ore deposits, expand the capacity of mines,
        or to develop mine areas substantially in advance of current production
        are also capitalized once proven and probable reserves exist and the
        property is a commercially mineable property. Costs incurred to maintain
        current production or to maintain assets on a standby basis are charged to
        operations. Costs of abandoned projects are charged to operations upon
        abandonment. The Company evaluates the carrying value of capitalized
        mining costs and related property, plant and equipment costs, to determine
        if these costs are in excess of their net recoverable amount whenever
        events or changes in circumstances indicate that their carrying amounts
        may not be recoverable. The periodic evaluation of carrying value of
        capitalized costs and any related property, plant and equipment costs are
        based upon expected future cash flows and/or estimated salvage
    value.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(b) | Other presentation items                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Under US GAAP, the Company would be considered an
      exploration stage company as it is devoting its efforts to establishing a
      commercially viable mineral property. However, the identification of the
      Company as such for accounting purposes does not impact the measurement
      principles applied in these consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(c) | Income tax                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | FASB Codification 740-10 ("Codification 740-10")
      Accounting for Uncertainty in Income Taxes, prescribes a minimum
      recognition threshold a tax position is required to meet before being
      recognized in the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Codification 740-10 requires that the Company recognize
      the impact of a tax position in the financial statements if that position
      is more likely than not of being sustained on audit, based on the
      technical merits of the position. Codification 740-10 also provides
      guidance on derecognition, classification, interest and penalties,
      accounting in interim periods and disclosure. In
  accordance with the provisions of Codification 740-10, any
      cumulative effect resulting from the initial adoption of Codification
      740-10 is to be recorded as an adjustment to the opening balance of
      deficit. The adoption of Codification 740-10 did not result in a material
      impact on the Company's consolidated financial position or results of
  operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2011, 2010 and 2009                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|(d) | Impact of recent United States accounting
      pronouncements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The FASB provided an update to address the classification
      of an employee share-based payment award with an exercise price
      denominated in the currency of a market in which the underlying equity
      security trades. FASB Accounting Standards Codification Topic 718,
      Compensation Stock Compensation, provides guidance on the
      classification of a share-based payment award as either equity or a
      liability. A share-based payment award that contains a condition that is
      not a market, performance, or service condition is required to be
      classified as a liability.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company has determined that the adoption of this
      standard had no significant impact on its results of operations or
      financial position.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The FASB issued Accounting Standards Update No. 2010-06,
      "Improving Disclosures about Fair Value Measurements" (ASU
      2010-06 or the ASU). The ASU amends ASC 820 to require a number of
      additional disclosures regarding fair value measurements. Specifically,
      the ASU requires entities to disclose:                                                                                                                                                                                                                                                                                       

| | (a) | the amounts of significant transfers between Level 1 and
      Level 2 of the fair value hierarchy and the reasons for these
    transfers        
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                   
| | (b) | the reasons for any transfers in or out of Level
  3                                                                                              
| |     |                                                                                                                                                   
| | (c) | information in the reconciliation of recurring Level 3
      measurements about purchases, sales, issuances and settlements on a gross
      basis

In addition to these new disclosure
requirements, the ASU also amends ASC 820 to clarify certain existing disclosure
requirements.

Except for the requirement to disclose
information about purchases, sales, issuances, and settlements in the
reconciliation of recurring Level 3 measurements on a gross basis, all the
amendments to ASC 820 made by ASU 2010-06 were in effect during the current
fiscal year. The requirement to separately disclose purchases, sales, issuances,
and settlements of recurring Level 3 measurements does not become effective
until fiscal years beginning after December 15 2010, including interim periods
within those fiscal years.

The Company has determined that the
adoption of the parts of this standard which are currently in effect had no
significant impact on its results of operations or financial position. The
Company neither expects the adoption of the parts of this standard which are not
currently in effect to have a significant impact on its results of operations or
financial position.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2011, 2010 and 2009                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|    | (iii)      Variable interest
      entities                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The FASB issued new guidance relating to accounting for
      Variable Interest Entities ("VIE") codified within ASC 810-10. Key changes
      include: (a) the elimination of the exemption for qualifying special
      purpose entities ("QSPE"); (b) a new approach for determining who should
      consolidate a VIE; and (c) changes to when it is necessary to reassess who
      should consolidate a VIE.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company has determined that the adoption of this
      standard will have no significant impact on its results of operations or
      financial position.                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                    
|11. | SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | There were no significant events subsequent to July 31,
      2011 requiring disclosure in these consolidated financial
    statements.                                                                                                                                                                                                                                                                            

---