QUARTZ MOUNTAIN RESOURCES LTD.

CONSOLIDATED FINANCIAL STATEMENTS
(Stated in United States dollars)

JULY 31, 2004

DAVIDSON & COMPANY Chartered Accountants A Partnership of Incorporated Professionals

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of
Quartz Mountain Resources Ltd.

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

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

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

"DAVIDSON & COMPANY"

Vancouver, Canada	Chartered Accountants
November 25, 2004

A Member of SC INTERNATIONAL

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

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

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

Continuing operations (Note 1)
Subsequent event (Note 9)

Approved by the Board:

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

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

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

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

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

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

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

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

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

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

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

Supplemental disclosure with respect to cash flows (Note 7)

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

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

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

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

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

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

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

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

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

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

3.	MINERAL PROPERTIES (continued)
	(c)	During the year ended July 31, 2002, the Company sold 100% of its title, right and interest in the Quartz Mountain property located in Lake County, Oregon to Seabridge Resources Inc. ("Seabridge"). As consideration, Seabridge:
		(i)	issued 300,000 common shares of Seabridge to the Company;
		(ii)	issued 200,000 common share purchase warrants of Seabridge to the Company exercisable by the Company at Cdn$0.90 for a period of two years;
		(iii)	paid US$100,000 to the Company;
		(iv)	will pay a 1% Net Smelter Return royalty to the Company on any production from the property.
		This resulted in a gain on sale of mineral property interest of $195,505.
		During the period subsequent to the sale of the Quartz Mountain property, the Company held the 300,000 common shares of Seabridge at a book value of $95,506. The Company sold the 300,000 shares received on the sale of the property and the 200,000 shares acquired at Cdn$0.90 each upon exercise of 200,000 share purchase warrants for a gain on disposal of investment in shares of $302,942.
	Shares issued for mineral properties are valued at the closing market value on the date of the commitment to issue the shares.
	Title to mineral properties involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral properties. The Company has investigated title to all of its mineral properties and, to the best of its knowledge, title to all of its properties are in good standing.
4.	SHARE CAPITAL
	Stock options and warrants

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

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

4.	SHARE CAPITAL (continued)
	Stock options and warrants (continued)
	On December 2, 2002, the Company issued 711,111 units at a price of Cdn$0.1125 for gross proceeds of Cdn$80,000. Each unit is comprised of one common share and one share purchase warrant. Each warrant entitles the holder to purchase a further common share exercisable until December 2, 2004 at a price of Cdn$0.15. The Company incurred professional fees of $793 in connection with this share issuance. The share purchase warrants issued as part of this private placement, have been recorded at a fair value of $9,492 and are included in contributed surplus.
	On April 19, 2004, the Company issued 1,510,000 units at a price of Cdn$0.28 for gross proceeds of Cdn$422,800. Each unit is comprised of one common share and one share purchase warrant. Each warrant entitles the holder to purchase a further common share exercisable until April 19, 2006, at a price of Cdn$0.37 per common share. The Company incurred professional fees of $3,833 in connection with this share issuance. The share purchase warrants issued as part of this private placement, have been recorded at a fair value of $54,540 and are included in contributed surplus.
	The Company has a Share Option Plan adopted in January 2004 the (“2004 Share Option Plan”). Under the Share Option Plan, participants, who are to be directors and employees of the Company and who, in the opinion of the Board of Directors, are in a position to contribute to the Company’s success or are worthy of special recognition, may be granted options to purchase common shares of the Company at a price per share as allowed under the rules and policies of the TSX Venture Exchange. The maximum aggregate number of shares that may be reserved for issuance under the 2004 Share Option Plan is 1,900,000 unless the plan is amended pursuant to the requirements of the TSX Venture Exchange policies. No service provider can be granted an option if that option would result in the service provider receiving shares, in conjunction with other share compensation arrangement, of greater than 5% of the outstanding listed shares. No option is exercisable until it has vested according to a vesting schedule specified by the Board of Directors at the time of the grant of the option. An option is exercisable for any period specified by the Board of Directors at the time of the grant of the option up to a maximum of five years after the date of grant. The previous plan has been cancelled.
	There were no stock options outstanding at July 31, 2004, 2003 and 2002.
5.	RELATED PARTY TRANSACTIONS
	During the year, the Company entered into the following transactions with related parties:
	(a)	The Company has paid $19,776 (2003 - $17,010; 2002 - $11,004) to a private company, for rent and administrative services, professional fees and geological costs, of which two of the directors of the Company are directors. During the year ended July 31, 2003, the Company completed a private placement with this private company of 711,111 units comprised of one common share and one share purchase warrant at a price of Cdn$0.1125 per unit.
	(b)	The Company has paid $606 (2003 - $2,065; 2002 - $Nil) for consulting services to a director and $Nil (2002 - $3,863; 2002 - $4,423) in legal fees to a law firm in which a director is a partner.

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

5.	RELATED PARTY TRANSACTIONS (continued)
	(c)	The Company paid $40,580 (2003 - $Nil; 2002 - $Nil) in consulting fees and reimbursement of expenses to a private company controlled by a director and officer of the Company, which is included in administration expenses.
	(d)	During the year ended July 31, 2004, 710,000 units of a private placement completed during the year were issued to directors of the Company or to directors of a private company performing administrative and other services to the Company.
	The amounts charged to the Company for the services provided have been determined by negotiation among the parties and, in certain cases, are covered by signed agreements. These transactions were in the normal course of operations and were measured at the exchange value, which represented the amount of consideration established and agreed to by the related parties.
6.	INCOME TAXES
	At July 31, 2004, the Company had estimated income tax losses available for application against future years’ taxable income of approximately $1,551,000 in the United States which, if unused, will predominantly expire between fiscal years ending 2005 and 2023. The Company also has tax losses in Canada of approximately $89,000, which if unused, will expire between fiscal 2005 and 2012. The Company also has resource allowance expenditures and capital asset deductions of approximately $949,000 and $30,000, respectively, which carry forward indefinitely. Because of the uncertainty regarding the Company's ability to utilize these amounts in future years, an allowance equal to the amount of the tax asset relating to these amounts has been provided.
	A reconciliation of income tax expense at the statutory rate of 35.62% (2003 – 37.62%; 2002 – 42.6%) with reported taxes is as follows:

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

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

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

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

7. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

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

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

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

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

	Year ended July 31,
		2004			2003			2002
Income (loss) for the year, Canadian GAAP	$	(136,252	)	$	15,971		$	459,843
Mineral property acquisition costs		-			(21,001	)		(1,271	)
Write-off of mineral property		21,001			1,271			-
Income (loss) for the year, US GAAP	$	(115,251	)	$	(3,759	)	$	458,572
Basic and diluted earnings (loss) per common share, US GAAP	$	(0.01	)	$	(0.01	)	$	0.05
Weighted average shares outstanding, basic and diluted, US GAAP		10,091,648			9,117,231			8,584,807
					July 31, 2004			July 31, 2003
Total assets, Canadian GAAP				$	693,697		$	520,095
Mineral property acquisition costs expensed per US GAAP					-			(21,001	)
Total assets – US GAAP				$	693,697		$	499,094
Current liabilities, Canadian GAAP and US GAAP				$	22,849		$	28,542
Shareholders’ equity, Canadian GAAP					670,848			491,553
Mineral property acquisition costs
2004					-			-
2003 and earlier					-			(21,001	)
Shareholders’ equity, US GAAP
					670,848			470,552
Total liabilities and shareholders’ equity, US GAAP				$	693,697		$	499,094

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

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

	Year ended July 31,
		2004			2003			2002
Cash flows used in operating activities, Canadian GAAP	$	(117,219	)	$	(39,054	)	$	(35,053	)
Adjustments to mineral properties		-			(14,432	)		-
Cash flows used in operating activities, US GAAP		(117,219	)		(53,486	)		(35,053	)
Cash flows provided by (used in) investing activities, Canadian GAAP		-			(14,432	)		498,450
Adjustments to mineral properties		-			14,432			-
Cash flows provided by investing activities, US GAAP		-			-			498,450
Cash flows provided by financing activities, Canadian GAAP and US GAAP		313,252			69,652			-
Increase in cash and cash equivalents during the year		196,033			16,166			463,397
Cash and cash equivalents, beginning of year		490,353			474,187			10,790
Cash and cash equivalents, end of year	$	686,386		$	490,353		$	474,187

Mineral properties

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

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

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