quartz mountain resources ltd. · quartz mountain resources ltd. for the year ended july 31, 2013...

QuartzMountainResourcesLtd.

MANAGEMENT'SDISCUSSIONANDANALYSIS

YEARENDEDJULY31,2013

QUARTZMOUNTAINRESOURCESLTD.FORTHEYEARENDEDJULY31,2013

MANAGEMENT’SDISCUSSIONANDANALYSIS

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TABLEOFCONTENTS

1.1 Date............................................................................................................................................................3

1.2 Overview.................................................................................................................................................3

1.3 SelectedAnnualInformation........................................................................................................14

1.4 SummaryofQuarterlyResults.....................................................................................................16

1.5 ResultsofOperationsandFinancialCondition.....................................................................17

1.6 Liquidity.................................................................................................................................................18

1.7 CapitalResources...............................................................................................................................20

1.8 Off‐BalanceSheetArrangements................................................................................................21

1.9 TransactionswithRelatedParties..............................................................................................21

1.10 FourthQuarter....................................................................................................................................22

1.11 ProposedTransactions....................................................................................................................22

1.12 CriticalAccountingEstimates.......................................................................................................23

1.13 ChangesinAccountingPoliciesincludingInitialAdoption..............................................23

1.14 FinancialInstrumentsandOtherInstruments......................................................................23

1.15 OtherMD&ARequirements...........................................................................................................23

1.16 RiskFactors..........................................................................................................................................25



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1.1 DATE

This Management's Discussion and Analysis ("MD&A") should be read in conjunction with theauditedconsolidatedfinancialstatementsofQuartzMountainResourcesLtd.("QuartzMountain"orthe"Company")fortheyearendedJuly31,2013aspubliclyfiledonSEDARatwww.sedar.com.AlldollaramountshereinareexpressedinCanadiandollarsunlessstatedotherwise.

TheCompanyreportsinaccordancewithInternationalFinancialReportingStandards("IFRS")andthe following disclosure, and associated financial statements, are presented in accordance withIFRS.AllcomparativeinformationprovidedisinaccordancewithIFRS.

For the purposes of the discussion below, date references refer to calendar year and not theCompany'sfiscalreportingperiod.

ThisMD&AispreparedasofOctober21,2013.

CautionaryNotetoInvestorsConcerningForward‐lookingStatements

Thisdiscussionincludescertainstatementsthatmaybedeemed"forward‐lookingstatements".Allstatements in this disclosure, other than statements of historical facts, that address permitting,explorationdrilling,exploitationactivitiesandeventsordevelopments that theCompanyexpectsare forward‐looking statements. Although the Company believes the expectations expressed insuch forward‐looking statements are based on reasonable assumptions, such statements are notguaranteesof futureperformanceandactual resultsordevelopmentsmaydiffermaterially fromthoseintheforward‐lookingstatements.Factorsthatcouldcauseactualresultstodiffermateriallyfrom those in forward‐looking statements include market prices, exploration and exploitationsuccesses, continuity of mineralization, potential environmental issues and liabilities associatedwithexploration,developmentandminingactivities,uncertaintiesrelated to theability toobtainnecessarypermits,licensesandtitleanddelaysduetothirdpartyoppositionorlitigation,changesin laws and government policies regarding mining and natural resource exploration andexploitation, continued availability of capital and financing, and general economic, market orbusinessconditions.Investorsarecautionedthatanysuchstatementsarenotguaranteesoffutureperformanceandactualresultsordevelopmentsmaydiffermateriallyfromthoseprojectedintheforward‐lookingstatements.TheCompanyreviewsitsforwardlookingstatementsonanon‐goingbasisandupdatesthisinformationwhencircumstancesrequireit.

1.2 OVERVIEW

The information comprised in this MD&A relates to Quartz Mountain Resources Ltd. and itssubsidiary(togetherreferredtoasthe"Company").QuartzMountainResourcesLtd.istheultimateparententityofthegroup.

QuartzMountainisanexplorationanddevelopmentcompanyfocusedonacquiringandadvancingpromising mineral prospects in British Columbia ("BC"). The Company’s current activities arefocusedontheGalaxiecopper‐goldproject(the"GalaxieProject")innorth‐westernBCandtheZNTsilver‐zincprojectincentralBC.

Geologically,theGalaxieProjectissituatedintheStikineTerrane,aregioninnorth‐westernBCthathostsanumberofimportantcopperandgolddeposits.Twoofthemoreadvancedprojectsinthe



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StikineTerraneincludetheImperialMetalsCorporation’sRedChrisporphyrycopper‐golddepositat which mine construction is currently underway, and Seabridge Gold Inc.’s Kerr‐Sulphurets‐Mitchell‐Snowfieldgoldprojectwhichisatthefeasibilitystage.

TheGalaxieProjecthas excellentpotential for thediscoveryofbulk tonnage copper‐goldand/ormolybdenum and vein‐type precious and base metal deposits. Historical exploration identifiedseveralcopperoccurrences,includingtheGnatporphyrycopperdeposit.Morerecentprospectingandothergroundsurveysidentifiedanumberofpromisingbaseandpreciousmetalstargets.

TheZNTprojectwasstakedbyQuartzMountainin2012asafollowuptothereleaseofinterestinggeochemical results from Geoscience BC. Exploration work in 2012 identified a high potentialsilver‐zinctargetatZNT.

InNovember2012,QuartzMountainenteredintoaletteragreement(the“LetterAgreement”)withAmarcResourcesLtd.(“Amarc”),wherebyAmarcearnedaninitial40%ownershipinterestintheGalaxie and ZNT Projects by funding a drilling program at the Gnat porphyry copper deposit atGalaxie. The program was carried out in late 2012; results confirmed the presence ofmineralization at depth in the Gnat deposit, returning intervals of 55.7 metres grading 0.44%copperand91.0metresgrading0.37%copperinthetwoholesdrilled.

In June2013,QuartzMountainandAmarcenteredintoanamendmentagreementthroughwhichAmarc has an option until October 31, 2013 to earn a 60% interest in the ZNT and Galaxieproperties,bymakingcertainpropertyexpenditures(furtherdetailsareprovidedinSection1.2.1).

A pitting and trenching programwas conducted at ZNT in July 2013, identifying a sizable silverdeposit‐target hosted by volcanogenic sandstones. Amarc plans to manage a follow up drillingprogramtoearn60%interestintheZNTproperty.

At Galaxie, a program of geological mapping, 10 line kilometres of Induced Polarization (“IP”)groundgeophysicalsurveyingandcollectionof96rockand246soilgeochemicalsamplesintheHu,Hotai andSilverLode areaswas conducted in the summerof2013. Basedon the resultsof thiswork, Amarc has indicated it expects to remain at a 40% interest in the Galaxie Project. InSeptember2013,theoptionrelatedtotheHotaiClaimswasterminated.

QuartzMountainalsohadanoption toearna100%interest in theBuckGold‐SilverProject (the“BuckProject”)whereexplorationworkbypreviousoperatorsoutlinedcoincidentgeophysicalandgeochemical anomalies. GroundworkwasdonebyQuartzMountain atBuck in 2011and2012.Difficultfinancingconditionsforjuniorcompaniesin2013necessitatedthattheCompanylimititsexploration expenditures and prioritize its property holdings. As a result, in July 2013, QuartzMountainterminateditsoptionontheBuckProject.

1.2.1 Agreements

GalaxieProject

SaleAgreementwithFinsburyExplorationLtd.

In August 2012, Quartz Mountain completed the acquisition of a 100% interest in the GalaxieProject from Finsbury Exploration Ltd. ("Finsbury") through a sale agreement (the "SaleAgreement")datedJuly27,2012.TheGalaxieProjectareaacquiredfromFinsburyincludedanarea



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of1,488squarekilometres,comprisedofthreemineralclaimstotalling1,294.3hectares(the"GnatPassProperty")andthesurroundingmineralclaimsstakedbyFinsburytothattime.

PursuanttothetermsoftheSaleAgreement,QuartzMountainissued2,038,111sharestoFinsburyand also assumed the rights and obligations of Finsbury under a mineral property purchaseagreement(the"BearclawAgreement")betweenFinsburyandBearclawCapitalCorp.("Bearclaw")relatingtotheGnatPassProperty.QuartzMountainalsoassumedtherightsandobligationsunderanNSRRoyaltyAgreementwhich requires thepayment toBearclawof a1%NSRroyaltyon theGnatPassPropertyuptoamaximumof$7,500,000.

The remaining payment obligations to Bearclaw for the Gnat Pass Property under the BearclawAgreementassumedbyQuartzMountainconsistedof:

1. apayment,onorbeforeAugust20,2012,toBearclawof$50,000incash(paid);

2. the issuance, on or before August 20, 2012, to Bearclaw of a convertible debenture (the“Debenture”) in theamountof $650,000at a rateof8%per annumandwith amaturitydate ofOctober31,2013(issued);and

3. the issuance, following the closing date of the transactions contemplated in the SaleAgreement,toBearclawof1,000,000sharesinthecapitalofQuartzMountain(issued).

AcquisitionofHotaiClaims

QuartzMountainalsoacquireda100%interestinninemineralclaimstotalling3,846hectaresthatareadjacenttotheGalaxieProject(the"HotaiClaims") fromCrucibleResourcesLtd.andMichaelRowley(together, the"HotaiVendors")throughamineralpropertysaleandpurchaseagreement(the"HotaiAgreement")datedasofJuly27,2012.

QuartzMountaincarriedoutinitialsurveysatHotaiin2012andfollowupworkwascarriedoutbyAmarcin2013inrelationtotheLetterAgreement.Followingreviewoftheresults, inSeptember2013,theoptionfortheHotaiClaimswasterminated.

AgreementwithAmarcResourcesLtd.

QuartzMountain and Amarc entered into a binding Letter Agreement dated November 1, 2012,pursuanttowhichAmarcearnedaninitial40%ownershipinterestintheGalaxieandZNTProjects(the "Projects"), by making a cash payment of $1,000,000 to Quartz Mountain (completed) andfunding$1,000,000inexplorationexpenditurestobeincurredbyQuartzMountainrelatingtotheGalaxieProjectonorbeforeDecember31,2012(completed).

QuartzMountainalsograntedtoAmarcanoptiontoacquireanadditional10%(foratotalof50%)ownershipinterestintheProjects,inconsiderationforAmarcfundinganadditional$1,000,000inexplorationexpendituresinrelationtotheProjects,onorbeforeSeptember30,2013.OnJune26,2013, theCompany entered into an amendment agreement (the "Amendment")whereby, amongother things, the Galaxie ZNT Project was divided into two separate joint ventures, named the"Galaxie Joint Venture" and the "ZNT Joint Venture". Each joint venture will continue to begovernedbythetermsofthepreviouslyexecutedagreement.UndertheAmendment,Amarchasanoption,untilOctober31,2013,toincreaseitsinterestineachoftheZNTJointVentureandGalaxieJointVenture from its current40% interest to a60%ownership interest by funding exploration



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expendituresof$210,000and$235,000,respectively.Amarcwasappointedmanagerofbothjointventures.

InSeptember2013,AmarcadvisedQuartzMountainthatit intendedtocompleteexpenditurestoearna60%interestintheZNTJointVenture. Amarcalsoadvisedthatitexpectedtoremainata40%interestintheGalaxieJointVentureandreturnedoperatorshipofGalaxietoQuartzMountain.

Quartz Mountain has also transferred to the Galaxie Joint Venture its obligation under theDebenturesecurityissuedtoaformerowneroftheGnatPassProperty.TheGnatPassPropertyissubjecttoa1%netsmelterreturnsroyalty,cappedataggregatepaymentsof$7.5million,retainedbyanarm'slengthparty.

InJuly2013,QuartzMountainandtheholderoftheDebentureenteredintoanagreementtoamendtheDebenture,wherebytheGalaxieJointVenturemadea$50,000paymenttowardtheDebenturereducingtheoutstandingbalanceto$600,000.Theinterestratewasincreasedto10%perannum,andthematuritydatewasextendedtoOctober31,2014.

BuckProject

InDecember2011,theCompanypurchasedanoption(the"Option")toacquirea100%interestintheBuckProjectlocatedincentralBritishColumbia.InJuly2013,QuartzMountainterminateditsoptionoftheBuckProject.

KarmaProject

The 16mineral claims comprising the Karma property, owned 100%byQuartzMountain,wereallowedtolapseduringthecurrentfiscalyear.

1.2.2 Financing

In December 2012, QuartzMountain completed a non‐brokered private placement (the "PrivatePlacement")of2,214,323commonshares,ofwhich1,752,409wereflow‐throughcommonsharesissuedatapriceof$0.30pershareand461,914werenon‐flow‐throughcommonsharesissuedatapriceof$0.25pershare,forgrosscashproceedsof$641,202.ProceedsfromthePrivatePlacementwillbeusedtoadvanceexplorationof theGalaxieProjectandforgeneralcorporateandworkingcapitalpurposes.



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1.2.3 TechnicalPrograms

ThelocationsofQuartzMountain’sGalaxieandZNTprojectsareshownonthemapbelow.



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GalaxieProject

ThefollowingdisclosureontheGalaxieProjecthasbeensummarizedfromatechnicalreport(the“2013 technical report”) entitled “TechnicalReporton theGalaxieProject,LiardMiningDivision,BritishColumbia”effectivedateApril30,2013byB.K.(Barney)Bowen,PEng,andupdatedbasedoninformationfromCompanyfiles.

TheGalaxieProjectislocatedonHighway37,approximately24kilometressouthofDeaseLake,BC.The Project‐area currently consists of 306mineral claims, including the Gnat Pass Property andadditionalclaimsstakedin2011‐2013,coveringanareaofapproximately1,165squarekilometres.

PavedHighway37passesthroughthecenteroftheGalaxieProjectandprovidesyear‐rounddirectaccess to the adjacent project‐area, including the Gnat Pass Property. Other parts of the GalaxieProjectcanbeaccessedbyhelicopter.

TheoperatingseasonforsurfaceexplorationisfromearlyJunethroughtoearlyOctober.BecauseofitscloseproximitytoHighway37,diamonddrillingactivitiesattheGnatdeposit,withintheGnatPassProperty,canbecarriedoutthroughouttheyear.

DeaseLake(populationofabout600)offersanarrayofservices,includingmotelaccommodations,food,fuel,avarietyofsmallequipmentoperators,postoffice,healthclinicandgovernmentservices.Miningandexplorationmakeupthemostsubstantial industry. RegionalPowermanagestheoff‐gridDeaseLakeGeneratingStation,locatedabout30kmwestofDeaseLake.Thefacilitysuppliesthe entire energy load for the community of Dease Lake. A new 287‐kilovolt transmission line,extending344kilometresfromtheexistingSkeenasubstationsouthofTerracetoanewsubstationnear Bob Quinn Lake, about 180 kilometres by road south of Dease Lake, is currently beingconstructed.ItwillsupplythenewminedevelopmentunderconstructionatRedChrisbywayofaspurlineatBobQuinnLake.

GeologyandMineralization

TheGalaxieProjectisunderlainmainlybyvolcanic, intrusiveandlessersedimentaryrocksoftheMiddleTriassictoLowerJurassicStikineTerranewhich,elsewhereinnorthernBritishColumbiaisknowntohostthelargeRed‐Chris,SchaftCreek,GaloreandKSMandSnowfieldporphyrydeposits.UpperTriassicStuhiniGroupvolcanicrocksandaquartzfeldsparporphyrydikecomplexhosttheGnatcopperdeposit.TheGnatdepositislocatedneartothenortherncontactoftheLateTriassictoMiddle Jurassic, multiphase Hotailuh Batholith‐Three Sisters Pluton intrusive complex, whichoccupiesmost of the remainder of the Galaxie project‐area and hosts a number of base and/orpreciousmetalsprospectsandshowings.

History

ThefirstrecordofexplorationintheGnatPassPropertyareawasin1960whenprospectingworkby Cassiar Asbestos Corporation discovered coppermineralization in the vicinity of Lower GnatLake. Since that time, at least nine companies have explored the property completing geologicalmapping,rock,soilandstreamsedimentgeochemicalsampling,magneticandinducedpolarization(IP)geophysicalsurveysanddiamonddrillingduringtheperiodsof1960‐1971,1990‐1996andin2005.MostofthehistoricalworkfocusedontheGnatdeposit,andoccurrencesinthevicinity.



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Duringtheperiod1965‐69,previousoperatorscompleted18,390metresofdiamonddrillingin110holesinthisarea. MostofthishistoricaldrillingwascarriedoutintheGnatdepositoveranareameasuringabout600metresby600metres,downtoamaximumdepthofabout300metresbelowsurface.

Ahistoricalestimateof"indicatedreserves"ofabout30milliontonnesgrading0.389%CufortheGnatDepositwasreportedbyLyttonMineralsLtd,in19721.Theestimateusescategoriesthatarenotrecognizedby43‐101StandardsofDisclosureforMineralProjects.Thequalifiedpersonforthe2013technicalreporthasnotdonesufficientworktoclassifythehistoricalestimateasacurrentmineral resource or mineral reserve. Quartz Mountain is not treating the historical estimate ascurrent.

PastworkonothermineraloccurrencesontheGalaxieProjectareaincludes:

• AtHu,duringtheperiod1969to2007,severalminingcompaniescarriedout:silt,soilandrock geochemical sampling; geologicalmapping; Induced Polarization (IP) and groundmagneticsurveys;and22bulldozertrenches.

• AtDisco,StikineMolyandStikine,duringtheperiod1970‐79,twocompaniescarriedout:silt,soilandrockgeochemicalsampling;geologicalmapping;IP,groundmagneticandVLFsurveys;andlimitedhandtrenchingandtest‐pitting.

• AtNup,duringtheperiod1970to2008,sixminingcompaniesandoneindividualcarriedout:silt,soilandrockgeochemicalsampling;geologicalmapping;IPandgroundmagneticsurveys;and limited hand trenching and test‐pitting. Three diamond drilling programs (14 holes) testedporphyrymolybdenum+/‐coppershowingsandsoilgeochemicalanomalies.

• At Pat, during the period 1971‐76, two companies carried out: grid soil surveys; IP andgroundmagneticsurveys;andarefractionseismicsurvey.

InSeptember2011,Finsburycompleteda first‐passreconnaissanceprospectingandgeochemicalsilt, soil and rock samplingprogramwithin a number of target areas in theGalaxie Claims area.Muchoftheworkwasoutsideofknownareasofmineralization,butsomeworkdidoverlapwithknownmineraloccurrences,includingsomeofthoselistedabove.Atotalof486silt,912soiland35rockgrabsampleswerecollected.

ThereisnorecordofpastworkhavingbeendoneontheHotaiProperty.

WorkbyQuartzMountain

In 2012,QuartzMountain completed extensive explorationwork on seven IP/soil grids and twotargetareasthroughouttheGalaxieProject‐area(seebelow).Totalsof182silt,6,155soiland498rock samples were collected and 308.5 line‐km of IP surveys were completed on the grids.Additionally,twoholesweredrilledattheGnatdepositundertheearn‐inagreementwithAmarc.

1AsdescribedinaCanadianVentureExchangereportin1972,basedon83AQ‐sizedrillholescompletedbyLyttonandotherstothattime,andincludes20%dilutionbywallrockgrading0.15%Cu.AstheQPofthe2013technicalreporthasnodocumentationregardingreserveestimationparameters,norhashesufficientgeologicalandassaydatafromhistoricaldiamonddrillholes,heisunabletoassessthereliabilityoftheestimate.



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GnatDeposit

In2012,QuartzMountainreloggedhistoricaldrillholesandcarriedoutgeologicalmappingintheGnat deposit‐area. The Company also completed two deep diamond drill holes totaling 1,164metresintheGnatdeposittotestforcontinuationofcoppermineralizationbeneaththehistoricalreserve estimate. Hole GT12001 intersected two intervals of significant coppermineralization,including 56 metres grading 0.44% Cu, well below the extent of the historical estimate,demonstratingthatporphyry‐stylecoppermineralizationintheGnatdepositextendsoveraknownverticalrangeofabout500metres.Intheirlowerportions,bothholesencounteredamajorthrustfaultwhichhasstructurallysuperimposedolderdeposithostrocksoveryounger,HazeltonGroupsedimentaryrocks.

Geological mapping in the Gnat deposit area identified porphyry‐style hydrothermal alterationcharacterized by occurrences of k‐feldspar veining and flooding, tourmaline in veins or brecciabodiesandchalcopyritemineralizationoverawest‐northwesttrendingzonemeasuringabout3.5kilometres long by 700metres to 1,000metreswide. Containedwithin this large 'hydrothermalfootprint'aretheCreekZoneandMosscopperprospects,thetwomainknownmineralizedzonesoutsideoftheGnatdepositarea(seefigurebelow).



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There is considerable room to explore for new zones of copper mineralization at moderate togreater depths in portions of the Gnat deposit, in the Creek Zone andMoss prospect areas, andelsewhere along the 3.5 kilometre‐long zone of porphyry‐style hydrothermal alteration.Mineralizationmayincludeporphyry‐typedepositsormoreconstrained,butpossiblyhighergrade,mineralizedbrecciabodies.

OtherTargets

Areviewofthe2012analyticaldataandtheaccompanyingIPsurveyresultsbytheauthorofthe2013 technical report identified several early to mid‐stage target areas Ground surveys wereundertakenin2013tofollow‐upontheHotai,HuandLodetargets(seeWorkin2013).

Otherhighprioritytargetsinclude:

PallenNorth

Thegeological,geochemicalandgeophysicalsignatureinthegridareaissuggestiveofthepresenceof a calc‐alkalic copper‐molybdenum mineralized center haloed by vein‐style polymetallicmineralization or the contact setting of the Pallen Creek Pluton intruding Stuhini Group countryrocks.Thepresenceofstronglyanomalouscopper‐in‐rockvaluesassociatedwithk‐feldsparaltered



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dioriteandmonzoniteinthenorthernpartofthetargetareaisencouragingandmaybeindicativeofadditionalporphyry‐typepotential.

DalvenieEast

Preliminaryprospectingof twogossans in the target‐areawassuccessful in locatingencouragingcoppermineralizationinchalcopyrite+/‐borniteveinsupto10cmwide,hostedinchlorite‐altereddioritetomonzodioritewallrocks.Narrowk‐feldsparalterationenvelopessurroundingtheveinsalsocontainchalcopyriteandbornite.MagneticsignaturesatDalvenieEastsuggestthatregional‐scalefaults,orsubsidiaryfaultsrelatedtothem,couldcontrolvein‐typeorfault‐controlledcopper‐goldmineralizationsimilartothatseenatthenearbyDalvenieprospect.

Workin2013

Integrated exploration surveys completed in2012byQuartzMountain delineated fourporphyrycoppertargetsintheHuandHotaiareasandasilverskarntargetattheSilverLodeplayforgroundfollow‐up.

AmarccompletedprogramsatHu,HotaiandSilverLodein2013aspartofitsearn‐inobligationsunder theamended jointventureagreementonGalaxie. The2013programs includedgeologicalmapping,10linekilometresofIPgroundgeophysicalsurveyingandcollectionof96rockand246soil geochemical samples. Althoughno immediate drill targetswere identified, a series of alkaliintrusions were observed around the Hu target which are known to be the principal hosts forporphyrycopper‐golddeposits,andmaywarrantfurtherexploration.

ZNTProject

TheZNTpropertyislocatedincentralBritishColumbia,some15kilometressoutheastofthetownofSmithers,BC.

The property was staked by Quartz Mountain in 2012 on the basis of significant zinc and goldvalues in regional till samples, aswell as copper and silvermineral occurrences as reported byGeoscience BC and the provincial government surveys, respectively. Following additionalcompilationworkonthearea,theCompanyacquiredfurtherground,expandingthepropertyto84mineralclaimswithanareaof389squarekilometres.

Asuccessfulinitialreconnaissance256‐samplesoilgeochemicalprogramin2012wasfollowedbyadetailed2,223‐samplesoilgeochemistrygridanda20line‐kilometreIPgeophysicalsurvey.Ahigh‐contrast, 1,800 metre by 1,200 metre silver‐zinc anomaly was defined within an open‐endedanomalous trend. This significant silver anomaly is, in part, coincident with an extensive IPchargeabilityanomalyindicatingthepresenceofanewlarge‐scalemineralizingsystem.

Workin2013

ApittingandtrenchingprogramcarriedoutbyAmarcinJuly2013wasdesignedtofurtherrefinethe target identified by Quartz Mountain’s program in 2012. Some 170 rock and 36 soilgeochemicalsampleswerecollectedfrom62pitsandtrenches.Integrationofthedatafromthesesurfaceprograms(seecompilationmapbelow)hasdefinedasizablesilverdeposit‐targethostedbyvolcanogenicsandstones.Initialdrillingtotestthetargetisplannedforthefallof2013.



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1.2.4 OtherProperties

Angel'sCampProperty

Quartz Mountain retains a 1% net smelter return royalty payable to the Company on anyproductionfromtheAngel'sCamppropertylocatedinLakeCounty,Oregon.

1.2.5 MarketTrends

Thediscussion in this section references calendaryears anddollar amounts are stated inUnitedStatesdollars.

Copper prices showed a significant increase between late 2003 andmid‐2008, and after a steepdecline in late2008andearly2009, steadily increaseduntil late2011. Thepriceof copperwasvariablein2012. Followingadowntrendearlyin2013thatlasteduntilApril,copperpriceshavebeenmorevariable,rangingbetween$3.01/lband$3.36/lb.



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Thegoldpricewasonanuptrendforoverthefiveyearsto2012. Priceshavebeenvolatilesincethattime,andincludeasignificantdowntrendinthefirstsixmonthsof2013.

Silverpriceswereimpactedbyeconomicvolatilityin2008‐2009.Anupwardpricetrendbeganin2010,andcontinuedtolateSeptember2011,withpricesreachingashighas$43/oz,andresultingin the average price in 2011 being the highest since 2008. Prices ranged between $26/oz and$35/ozbetweenOctober2011andtheendof2012.PriceswereonadowntrendfromFebruarytoAugust2013,buthavestabilizedsincethattime.

Averageannualpricesthrough2012aswellastheaveragepricessofar in2013forcopper(Cu),gold(Au)andsilver(Ag)areshowninthetablebelow:

CalendarYearMetalPrices

Cu Au Ag

2008 $3.16/lb $871/oz $14.95/oz

2009 $2.34/lb $974/oz $14.70/oz

2010 $3.42/lb $1,228/oz $20.24/oz

2011 $4.00/lb $1,572/oz $35.25/oz

2012 $3.61/lb $1,669/oz $31.16/oz

2013todateoftheMD&A $3.34/lb $1,442/oz $24.54/oz

1.3 SELECTEDANNUALINFORMATION

The following selected annual information is from the Company's annual financial statementswhich have been prepared in accordance with IFRS as issued by the International AccountingStandards Board ("IASB") and interpretations of the IFRS Interpretations Committee ("IFRIC")effectivefortherespectivereportingyearsoftheCompanyandareexpressedinCanadianDollars.TheCompany'sauditedfinancialstatementsarepubliclyavailableonSEDARatwww.sedar.com.

AmountsareexpressedinthousandsofCanadiandollars(exceptpershareamounts).

StatementsofFinancialPosition–SelectedInformation Jul31,2013 Jul31,2012 Jul31,2011Totalcurrentassets $850 $2,743 $99Totalnon‐currentassets 1,620 78 –Totalassets $2,470 $2,821 $99

Totalcurrentliabilities $2,593 $1,832 $42Totalnon‐currentliabilities 600 – –Totalshareholders’equity (723) 989 57Totalliabilitiesandshareholders’equity $2,470 $2,821 $99



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Total assets are comprised of cash and cash equivalents, amounts and other receivables, andrestricted cash. Total assets increased from 2011 to 2012 as a result of cash received from theCompany’sprivateplacementinDecember2011.Thedeclinefrom2012to2013isarelatedtoadecreaseincashastheCompanyfundeditson‐goingexplorationactivities.

Totalshort‐termliabilities increased in fiscal2013dueto increase intradepayableandbalancespayable to related parties for geological, engineering, corporate development, administrative,managementandshareholdercommunicationservicesreceived.

Non‐currentliabilitiesarecomprisedentirelyoftheCompany’sportionoftheDebentureissuedtopurchasetheGalaxieProjectandinterestaccruedthereon(Section1.2.1).

StatementsofComprehensiveLoss–SelectedInformation

YearendedJuly31,2013



Expenses: Explorationandevaluation $3,880 $2,247 $–Generalandadministration 1,359 1,166 186Equity‐settledshare‐basedpayments 211 381 –Lossfromoperations (5,450) (3,794) (186)Gainondispositionofmineralpropertyinterest 1,579 – –Otheritems(i) 413 206 11Lossfortheyear $(3,459) $(3,588) $(175)

Basicanddilutedlosspercommonshare $(0.13) $(0.20) $(0.01)

(i) Otheritemsareinclusiveof:flow‐throughsharepremium,interestincome,interestexpense,foreignexchangegains(losses),andtaxrelatedtoflow‐throughfinancing.



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1.4 SUMMARYOFQUARTERLYRESULTS

TheseamountsareexpressedinthousandsofCanadianDollars,exceptpershareamountsandtheweightedaveragenumberofcommonsharesoutstanding.Minordifferencesareduetorounding.

FiscalQuarterEnded Jul‐31

2013Apr‐302013

Jan‐312013

Oct‐312012

Jul‐312012

Apr‐302012

Jan‐312012

Oct‐312011

Expenses:

Explorationandevaluation $(20) $160 $1,202 $2,538 $1,206 $238 $802 $–

Generalandadministration 242 326 436 355 417 355 295 100Equity‐settledshare‐basedpayments 23 28 76 85 171 183 26 –Lossfromoperations (245) (514) (1,714) (2,978) (1,794) (776) (1,123) (100)

Gainondispositionofamineralpropertyinterest – – 1,579 – – – – –

Otheritems(i) 23 4 5 380 172 32 2 –

Lossfortheperiod $(222) $(510) $(130) $(2,598) $(1,622) $(744) $(1,121) $(100)

Basicanddilutedlosspercommonshare $0.01 $0.02 $0.01 $0.11 $0.08 $0.03 $0.07 $0.01

(i) "Otheritems"includesflowthroughsharepremium,interestincome,interestexpense,foreignexchangeandtaxrelatedtoflow‐throughfinancing.

Quarterlyexpendituresrose inthesecondhalfof fiscal2012asaresultof thereactivationof theCompany'sactivities following thepurchaseof theoption in theBuckProject inDecember2011.Prior to this time the Company was largely inactive. Exploration and evaluation expendituresincreased in the first half of fiscal 2013 due to the acquisition of the Galaxie Project, and ZNTproject. Administrative costs tended to follow the trend in the exploration programs and thebusinessdevelopmentactivitiesoftheCompany.

In the quarter ended July 31, 2013, the Company recorded $200,000 within exploration andevaluation expenses as cost recoveries pertaining to Mineral Exploration Tax Credits from theprovincialgovernmentofBritishColumbia.

Expenses for share‐based payments typically fluctuate based on the timing of share purchaseoptiongrantsandthevestingperiodsassociatedwiththesegrants.Thefairvalueofsharepurchaseoptions is determined at the grant date and the compensation expense for each tranche isrecognized over the period during which the share purchase options vest. The share‐basedpaymentsexpenserecognizedduringthe January2012quarterrelates tosharepurchaseoptionsissued mainly to employees and directors of the Company during that quarter. In subsequent



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quarters, the trend in share‐based payments represents amortization of the fair value of thesesharepurchaseoptions.

During the quarter ended January 31, 2013, the Company recognized a gain of $1,579,000 inrelation to the40%dispositionof itsmineralproperty interest to theLetterAgreement (section1.2.1).

1.5 RESULTSOFOPERATIONSANDFINANCIALCONDITION

The following financial data has been prepared in accordance with IFRS and are expressed inCanadiandollarsunlessotherwisestated.

1.5.1ComprehensivelossfortheyearendedJuly31,2013vs.2012

TheCompanyrecordedalossfromoperationsof$3,459,000inthecurrentyearcomparedtoalossfromoperationsof$3,588,000inthepriorfiscalyear.

ExplorationcostsincreasedinthecurrentyearastheCompanyadvancedexplorationactivitiesontheGalaxieProject(includingHotaiClaims)andtheZNTprojectindependentlybeginninginAugust2012 through December 2012 and from then on as a 60% partner in relation to the LetterAgreement (Section 1.2.1). Additionally, the Company was required to make cash and sharepaymentsinrelationtoacquisitionoftheHotaiandZNTclaims.

ThefollowingtablesprovideabreakdownofexplorationcostsincurredduringtheyearendedJuly31,2013and2012:

FortheYearEndedJuly31,2013Explorationandevaluationcosts Buck Galaxie Hotai Karma ZNT Other(i) Total

Assaying $27,296 $239,526 $16,976 $20,075 $55,035 $1,020 $359,928

Drilling – 265,336 – – – – 265,336

Environmental – 122 – – 488 – 610

Engineering 8,424 9,044 – 4,050 – – 21,518

Geological 43,521 1,331,104 132,127 5,612 176,547 (128,641) 1,560,270

Graphics 7,412 18,913 1,615 1,615 8,899 9,010 47,464

Propertyfees 125 15,590 14,555 – 53,692 – 83,962

Siteactivities 26 626,914 9,083 3,445 71,346 12,524 723,338

Socioeconomic 8,659 12,016 725 3,562 7,230 2,141 34,333

Helicopter – 632,568 57,997 – – – 690,565

Travel 861 74,840 1,271 835 15,310 – 93,117

Total $96,324 $3,225,973 $234,349 $39,194 $388,547 $(103,946) $3,880,441

(i) RecordedundergeologicalexpensesarecostrecoveriespertainingtoMineralExplorationTaxCreditsfromtheprovincialgovernmentofBritishColumbia



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FortheYearEndedJuly31,2012Explorationandevaluationcosts Buck Galaxie Hotai Karma Other Total

Assaying $45,963 $2,696 $– $1,998 $2,088 $52,745

Engineering 8,400 – – – – 8,400

Environmental 1,375 – – – – 1,375

Geological 329,108 288,152 13,280 225,603 14,374 870,517

Graphics 9,741 702 312 624 1,627 13,006

Helicopter – 100,914 – – – 100,914

Propertyfees 889,044 1,518 – 16,944 3,313 910,819

Siteactivities 31,595 89,928 6,200 14,201 1,620 143,544

Socioeconomics 77,969 2,410 1,365 7,842 60 89,646

Travel 13,978 31,210 – 9,943 553 55,684

Total $1,407,173 $517,530 $21,157 $277,155 $23,635 $2,246,650

Thefollowingtableprovidesabreakdownoftheadministrationcostsincurred:

Administrationcosts 2013 2012

Legal,accountingandaudit $61,634 $301,641

Officeandadministration 123,215 70,140

Salariesandbenefits 1,038,364 686,358

Shareholdercommunication 50,541 28,097

Travel 40,197 31,357

Trustandfiling 45,371 48,659

Total $1,359,322 $1,166,252

Intheprioryear,legalandadministrativecostsrelatedtothereactivationoftheCompany,movingfromtheNEXExchangetotheTSX‐V,andlegalcostsrelatedtoacquiringtheoptionsontheBuckandGalaxie(includingtheHotaiClaims)Projectsresultedinhigheradministrationcosts.

In the current year, salaries and benefits increased in support of exploration activities as theCompanyadvancedworkontheGalaxieandZNTProjects.

In the current fiscal year, the Company expensed stock options to employees and directors for$211,000comparedto$381,000inthesamecomparativefiscalyear.

1.6 LIQUIDITY

Historically, theCompany's sourceof fundinghasbeen the issuanceof equitysecurities forcash,primarilythroughprivateplacementstosophisticatedinvestorsandinstitutions.TheCompanyisin theprocessof acquiringandexploringmineralproperty interests. TheCompany's continuingoperations are entirely dependent upon the ability of the Company to obtain the necessary



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financingtocompletetheexplorationanddevelopmentofitsprojects,theexistenceofeconomicallyrecoverablemineral reserves at its projects, the ability of the Company to obtain the necessarypermitstomine,onfutureprofitableproductionofanymineandtheproceedsfromthedispositionofitsmineralpropertyinterests.

AtJuly31,2013,theCompanyhadcashandcashequivalentsof$0.7millionandaworkingcapitaldeficitof$1.7million.Ofthetotalshort‐termliabilitiesof$2.6millionatJuly31,2013,$2.4millionwaspayabletoHunterDickinsonServicesInc.("HDSI"),arelatedparty.

Toaddress itsworkingcapitaldeficit at July31,2013, theCompanyhas receiveda confirmationfrom HDSI that HDSI will continue to provide services to the Company and will not demandrepaymentofamountsoutstanding,priortoAugust1,2014.

Management believes that its liquid assets at July 31, 2013 are sufficient to meet its knownobligationsfallingdueinnext12monthsandtomaintainitsmineralrightsingoodstandingforthisnext12monthperiod.

Additionaldebtorequityfinancingwillberequiredtofundadditionalexplorationordevelopmentprograms. The Company has a reasonable expectation that additional fundswill be available tomeet ongoing exploration and development costs. However, there can be no assurance that theCompanywill continue to obtain additional financial resources or that itwill be able to achievepositivecashflows.IftheCompanyisunabletoobtainadequateadditionalfinancing,theCompanywillberequiredtore‐evaluateitsplannedexpendituresandwillrelyonshorttermborrowingstofinance its minimum expenditure requirement until additional funds can be raised throughfinancingactivities.

Recently, general market conditions for junior resource companies have deteriorated and haveresulted in depressed equity prices for resource companies, despite higher commodity prices.AlthoughtheCompanywasabletosuccessfullycompleteprivateplacementsineachofDecember2012 and December 2011, the deterioration inmarket conditions could potentially increase thecostofobtainingcapitalorlimittheavailabilityoffundsinthefuture.Accordingly,managementisactivelymonitoring theeffectsof the currenteconomicand financingconditionsonourbusinessand reviewing our discretionary spending, capital projects and operating expenditures, andimplementingappropriatecashandcashmanagementstrategies.

Debenture

InAugust2012,pursuanttotheSaleAgreementrelatingtotheGalaxieProject,theCompanyissueda convertible debenture (the "Debenture") in the amount of $650,000maturing on October 31,2013,andbearinginterestatarateof8%perannum(payablequarterly inarrears)toBearclaw.TheDebentureisconvertibleintotheCompany'scommonsharesataconversionpriceof$0.40pershareatanytimebeforeitsexpiry.

AspartoftheGalaxieandZNTLetterAgreement(Section1.2.1),theCompanytransferredintothejoint arrangement, among other items, 40% of its obligations under the $650,000 convertibledebenture.

InJuly2013,QuartzMountainandtheholderoftheDebentureenteredintoanagreementtoamendtheDebenture,whereby amongother things, theCompanymade a $50,000payment toward theDebenturereducingtheoutstandingbalanceto$600,000, the interestratewas increasedto10%



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per annum from8%per annum, and thematurity datewas extended toOctober 31, 2014 fromOctober31,2013.

Interest payments for the Debenture are payable quarterly in arrears and the Debenture isconvertibleintotheCompany'scommonsharesatanexercisepriceof$0.15pershare(previously$0.40pershare)onorbeforematurityoftheDebentureonOctober31,2014.Anyinterestaccrued,but unpaid, shall be converted at an exercise price of the higher of $0.15 per share (previously$0.40pershare)andthemarketpriceatthetimeofconversion.

TableofObligationsandCommitments

ThefollowingobligationsexistedatJuly31,2013:

Paymentsduebyperiod

TotalLessthan1

year 1‐5years After5yearsAmountspayableandotherliabilities $136,137 $136,137 $– $–Convertibledebentures 600,000 – 600,000 –Duetorelatedparties 2,421,220 2,421,220 – –Total $3,157,357 $2,557,357 $600,000 $–

AtJuly31,2013,approximately$214,000remainedtobeincurredoneligibleCanadianExplorationExpenses(“CEE”)priortoDecember31,2013.

TheCompanyhasnomaterial capital leaseor operating leaseobligations. TheCompanyhasno"PurchaseObligations",definedasanyagreementtopurchasegoodsorservicesthatisenforceableandlegallybindingontheCompanythatspecifiesallsignificantterms,including:fixedorminimumquantities to be purchased; fixed, minimum or variable price provisions; and the approximatetimingofthetransaction.

1.7 CAPITALRESOURCES

In December 2012, the Company completed a non‐brokered private placement of 2,214,323commonshares,ofwhich1,752,409wereflow‐throughcommonsharesissuedatapriceof$0.30pershareand461,914werenon‐flow‐throughcommonsharesissuedatapriceof$0.25pershare,for aggregate gross cash proceeds of $641,202. The Company incurred issuance costs ofapproximately$25,422,fornetcashproceedsof$615,780.

Inaccordancewith thetermsof the flow‐throughshareagreements, theCompany isobligatedtospendtheproceedsof the flow‐throughportion($525,723)of the financingonCEEbyDecember31,2013.

TheCompanyhadnomaterialcommitmentsforcapitalexpendituresasatJuly31,2013.

TheCompanyhasnolinesofcreditorothersourcesoffinancingwhichhavebeenarrangedbutareasofyet,unused.



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AtJuly31,2013,therewerenoexternallyimposedcapitalrequirementstowhichtheCompanyissubjectandwithwhichtheCompanyhasnotcomplied.

ThecapitaloftheCompanyconsistsofitemsincludedinshareholders’equityanddebt,netofcashandcashequivalentasfollows:

July31,2013 July31,2012Shareholders’equity $(723,182) $989,036Less:Cashandcashequivalents (706,393) (2,450,451)Total $(1,429,575) $(1,461,415)

AstheCompanycontinuestoincurlossesinsupportoftheadvancementofexplorationactivitiesonitsprojects,Shareholders’equityhascometobeinadeficitposition.

Asa result of thedebenture, theCompany's long‐termdebt increased from$nil to$0.36million,representingachangeintheCompany’scapitalstructure.Refertosection1.6Liquidityforcostofborrowingsandotherdetails.

1.8 OFF‐BALANCESHEETARRANGEMENTS

None.

1.9 TRANSACTIONSWITHRELATEDPARTIES

Therequireddisclosureisprovidedinnote11oftheaccompanyingfinancialstatements.



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1.10 FOURTHQUARTER

TheCompanyrecordedanetlossof$222,000forthequarterendedJuly31,2013,comparedtoanetlossof$1,622,000duringthesamequarterinfiscal2012.

Forthethreemonths

endedJuly31

Expenses2013

($000's)2012

($000's) Discussion

Explorationexpenses(excludingshare‐basedpayments)

(20) 1,206 InthequarterendedJuly31,2013,theCompanyrecorded $200,000 within exploration andevaluationexpensesascostrecoveriespertainingto Mineral Exploration Tax Credits from theprovincialgovernmentofBritishColumbia.

Directexplorationactivitieswerehigher in fiscalperiod 2012, during which time the CompanymadepaymentsofcashandsharespursuanttoanoptionagreementtoacquiretheBuckProjectandHotaiClaims,andgeologicalandsiteactivitiesfortheBuckProject.

Administrationexpenses(excludingshare‐basedpayments)

242 417 The decrease in administration expenses wasmainly due to the legal and administrationexpenses incurred during fiscal 2012 for costsrelated to the reactivation of the Company andmovingfromtheNEXExchangetotheTSX‐V,andlegalcostsrelatedtoacquiringtheoptionsontheBuck and Galaxie (including the Hotai Claims)Projects; those expenses were not incurredduringfiscal2013.

Equity‐settledshare‐basedpayments

23 171 Share‐based compensation expense typicallyfluctuatesbasedon the timingofsharepurchaseoption grants and the vestingperiods associatedwiththesegrants.

1.11 PROPOSEDTRANSACTIONS

There are no proposed assets or business acquisitions or dispositions, other than those in theordinarycourse,beforetheboardofdirectorsforconsideration.



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1.12 CRITICALACCOUNTINGESTIMATES

Notrequired.TheCompanyisaVentureIssuer.

1.13 CHANGESINACCOUNTINGPOLICIESINCLUDINGINITIALADOPTION

Therequireddisclosureisprovidedinnotes2and3oftheaccompanyingfinancialstatements.

1.14 FINANCIALINSTRUMENTSANDOTHERINSTRUMENTS

The carrying amounts of cash and cash equivalents, amounts receivable, accounts payable andaccrued liabilities, andbalancesdue to relatedparties, approximate their fairvaluesdue to theirshort‐termnature. The requireddisclosure is provided in note 15 of the accompanying auditedfinancial statements as at and for the year ended July 31, 2013,which are publicly available onSEDARatwww.sedar.com.

1.15 OTHERMD&AREQUIREMENTS

1.15.1 AdditionalDisclosureforVentureIssuersWithoutSignificantRevenue

(a)explorationandevaluationassetsorexpenditures:

TherequireddisclosureispresentedintheauditedconsolidatedstatementsofcomprehensivelossandSection1.5ofthisMD&A.

(b)expensedresearchanddevelopmentcosts:

Notapplicable

(c)intangibleassetsarisingfromdevelopment:

Notapplicable

(d)generalandadministrationexpenses:

TherequireddisclosureispresentedintheauditedconsolidatedstatementsofcomprehensivelossandSection1.5ofthisMD&A.

(e)anymaterialcosts,whetherexpensedorrecognizedasassets,notreferredtoinparagraphs(a)through(d):

None



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1.15.2 DisclosureofOutstandingShareData

ThefollowingdetailsthesharecapitalstructureasatthedateofthisMD&A:

NumberCommonshares 27,299,513Shareoptions 1,705,800Convertibledebenture 4,000,000

1.15.3InternalControlsoverFinancialReportingProcedures

TheCompany'smanagement,includingtheChiefExecutiveOfficerandtheChiefFinancialOfficer,isresponsible for establishing and maintaining adequate internal control over financialreporting. Under the supervision of the Chief Executive Officer and Chief Financial Officer, theCompany's internal control over financial reporting is a process designed to provide reasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsfor external purposes in accordance with IFRS. The Company's internal control over financialreportingincludesthosepoliciesandproceduresthat:

• pertaintothemaintenanceofrecordsthat,inreasonabledetail,accuratelyandfairlyreflectthetransactionsanddispositionsoftheassetsoftheCompany;

• provide reasonable assurance that transactions are recorded as necessary to permitpreparationoffinancialstatementsinaccordancewithIFRS,andthatreceiptsandexpendituresoftheCompanyarebeingmadeonlyinaccordancewithauthorizationsofmanagementanddirectorsofthecompany;and

• provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of the Company's assets that could have a material effect on thefinancialstatements.

TherehasbeennochangeinthedesignoftheCompany'sinternalcontroloverfinancialreportingthat has materially affected, or is reasonably likely to materially affect, the Company's internalcontrol over financial reportingduring the period coveredby thisManagement'sDiscussion andAnalysis.

1.15.4DisclosureControlsandProcedures

TheCompanyhasdisclosurecontrolsandproceduresinplacetoprovidereasonableassurancethatanyinformationrequiredtobedisclosedbytheCompanyundersecuritieslegislationisrecorded,processed, summarized and reported within the appropriate time periods and that requiredinformationisaccumulatedandcommunicatedtotheCompany'smanagement,includingtheChiefExecutiveOfficerandChiefFinancialOfficer,asappropriate,so thatdecisionscanbemadeaboutthetimelydisclosureofthatinformation.



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1.15.5LimitationsofControlsandProcedures

The Company's management, including its Chief Executive Officer and Chief Financial Officer,believe that any system of disclosure controls and procedures or internal control over financialreporting,nomatterhowwellconceivedandoperated,canprovideonlyreasonable,notabsolute,assurancethattheobjectivesofthecontrolsystemaremet.Furthermore,thedesignofacontrolsystemmustreflectthefactthatthereareresourceconstraintsandthebenefitsofcontrolsmustbeconsideredrelative to theircosts.Becauseof the inherent limitations inallcontrolsystems, theycannotprovideabsoluteassurancethatallcontrolissuesandinstancesoffraud,ifany,withintheCompany have been prevented or detected. These inherent limitations include the realities thatjudgmentsindecision‐makingcanbefaultyandbreakdownscanoccurbecauseofsimpleerrorormistake. Additionally, controls can be circumvented by the individual acts of some persons, bycollusionoftwoormorepeople,orbyunauthorizedoverrideofcontrols.Thedesignofanysystemofcontrolsisalsobasedinpartuponcertainassumptionsaboutthelikelihoodoffutureevents,andthere can be no assurance that any design will succeed in achieving its stated goals under allpotential future conditions. Accordingly, because of the inherent limitations in a cost effectivecontrolsystem,misstatementsduetoerrororfraudmayoccurandnotbedetected.

1.16 RISKFACTORS

TheriskfactorsassociatedwiththeprincipalbusinessoftheCompanyarediscussedbelow.DuetothenatureoftheCompany'sbusinessandthepresentstageofexplorationanddevelopmentofitsprojects in British Columbia, an investment in the securities of Quartz Mountain is highlyspeculativeandsubjecttoanumberofrisks.Briefly,theseincludethehighlyspeculativenatureoftheresourcesindustrycharacterizedbytherequirementforlargecapitalinvestmentsfromanearlystageandaverysmallprobabilityoffindingeconomicmineraldeposits.Inadditiontothegeneralrisksofmining,therearecountry‐specificrisks,includingcurrency,political,social,permittingandlegal risk. An investor should carefully consider the risks described below and the otherinformation that Quartz Mountain furnishes to, or files with, the Securities and ExchangeCommission and with Canadian securities regulators before investing in Quartz Mountain'scommonshares,andshouldnotconsideraninvestmentinQuartzMountainunlesstheinvestoriscapableofsustaininganeconomiclossoftheentireinvestment.TheCompany'sactualexplorationandoperatingresultsmaybeverydifferentfromthoseexpectedasatthedateofthisMD&A.

Exploration,DevelopmentandMiningRisks

Resource exploration, development, and operations are highly speculative, characterized by anumber of significant risks, which even a combination of careful evaluation, experience andknowledgemaynot reduce, includingamongother things,unsuccessfulefforts resultingnotonlyfrom the failure to discover mineral deposits but from finding mineral deposits which, thoughpresent,areinsufficientinquantityandqualitytoreturnaprofitfromproduction.Fewpropertiesthat are explored are ultimately developed into producing mines. Unusual or unexpectedformations, formation pressures, fires, power outages, labour disruptions, flooding, explosions,cave‐ins,landslidesandtheinabilitytoobtainsuitableoradequatemachinery,equipmentorlabourareotherrisks involved intheoperationofminesandtheconductofexplorationprograms. TheCompany will rely upon consultants and others for exploration, development, construction and



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operating expertise. Substantial expenditures are required to establish mineral resources andmineral reserves through drilling, to develop metallurgical processes to extract the metal frommineralresources,andinthecaseofnewproperties,todeveloptheminingandprocessingfacilitiesandinfrastructureatanysitechosenformining.

No assurance can be given that minerals will be discovered in sufficient quantities to justifycommercialoperationsorthatfundsrequiredfordevelopmentcanbeobtainedonatimelybasis.Whether amineraldepositwillbe commerciallyviabledependsonanumberof factors, someofwhich are: the particular attributes of the deposit, such as size, grade and proximity toinfrastructure; metal prices, which are highly cyclical; and government regulations, includingregulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting ofminerals, and environmental protection. The exact effect of these factors cannot accurately bepredicted, but the combination of these factors may result in the Company not receiving anadequatereturnoninvestedcapital.

The Companywill carefully evaluate the political and economic environment in considering anypropertiesforacquisition.

FutureProfits/LossesandProductionRevenues/Expenses

TheCompanyhasnohistoryofoperationsorearnings,andexpectsthatitslossesandnegativecashflow will continue for the foreseeable future. The Company currently has a limited number ofmineral properties and there can be no assurance that the Company will, if needed, be able toacquire additional properties of sufficient technical merit to represent a compelling investmentopportunity.IftheCompanyisunabletoacquireadditionalproperties,itsentireprospectswillrestsolely with its current projects and accordingly, the risk of being unable to identify a mineraldepositwillbehigher than if theCompanyhadadditionalproperties toexplore.Therecanbenoassurance that the Company will ever be profitable in the future. The Company's operatingexpenses and capital expenditures may increase in subsequent years as needed consultants,personnel and equipment associated with advancing exploration, development and commercialproductionof its currentpropertiesandanyotherproperties that theCompanymayacquireareadded. The amounts and timing of expenditures will depend on the progress of on‐goingexplorationanddevelopment,theresultsofconsultants'analysesandrecommendations,therateatwhichoperatinglossesareincurred,theexecutionofanyjointventureagreementswithstrategicpartners,andtheCompany'sacquisitionofadditionalpropertiesandotherfactors,manyofwhichare beyond the Company's control. The Company does not expect to receive revenues fromoperations in the foreseeable future,andexpects to incur lossesunlessanduntilsuchtimeas itscurrent properties, or any other properties the Company may acquire, commence commercialproductionandgeneratesufficientrevenuestofunditscontinuingoperations.ThedevelopmentoftheCompany'scurrentpropertiesandanyotherpropertiestheCompanymayacquirewillrequirethe commitment of substantial resources to conduct the time‐consuming exploration anddevelopment of properties. The Company anticipates that it will retain any cash resources andpotentialfutureearningsforthefutureoperationanddevelopmentoftheCompany'sbusiness.TheCompanyhasnotpaiddividendssinceincorporationandtheCompanydoesnotanticipatepayingdividendsintheforeseeablefuture.TherecanbenoassurancethattheCompanywillgenerateanyrevenuesorachieveprofitability.Therecanbenoassurancethattheunderlyingassumedlevelsofexpenseswillprovetobeaccurate.Totheextentthatsuchexpensesdonotresultinthecreationof



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appropriate revenues, the Company's business may be materially adversely affected. It is notpossibletoforecasthowthebusinessoftheCompanywilldevelop.

PermitsandLicenses

The operations of the Company will require licenses and permits from various governmentalauthorities. There can be no assurance that the Company will be able to obtain all necessarylicensesandpermitswhichmayberequiredtocarryoutexplorationanddevelopmentoftheBuck,Galaxie,KarmaandZNTProjects.

AdditionalFundingRequirements

Further development of the Company's properties will require additional capital. The Companycurrentlydoesnothavesufficientfundstofullydevelopthepropertiesitholds.ItispossiblethatthefinancingrequiredbytheCompanywillnotbeavailable,or,ifavailable,willnotbeavailableonacceptable terms. If the Company issues treasury shares to finance its operations or expansionplans, control of the Company may change and shareholders may suffer dilution of theirinvestment. If adequate funds are not available, or are not available on acceptable terms, theCompanymaynotbeabletotakeadvantageofopportunities,orotherwiserespondtocompetitivepressures and remain in business. In addition, a positive production decision at any of theCompany's current projects or any other development projects acquired in the future wouldrequire significant resources/funding for project engineering and construction. Accordingly, thecontinuingdevelopment of theCompany's propertieswill dependupon theCompany's ability toobtain financingthroughdebt financing,equity financing, thejointventuringofprojects,orothermeans. There is no assurance that the Company will be successful in obtaining the requiredfinancingfortheseorotherpurposes,includingforgeneralworkingcapital.

GoingConcernAssumption

TheCompany'sconsolidatedfinancialstatementshavebeenpreparedassumingtheCompanywillcontinueonagoingconcernbasis.However,unlessadditionalfundingisobtained,thisassumptionwill have to change. TheCompanyhas incurred losses since inception. Failure to continue as agoing concern would require that Quartz Mountain's assets and liabilities be restated on aliquidationbasis,whichcoulddiffersignificantlyfromthegoingconcernbasis.

InfrastructureRisk

The operations of the Company are carried out in geographical areas whichmay lack adequateinfrastructureandaresubjecttovariousotherriskfactors. Mining,processing,developmentandexplorationactivitiesdepend,toonedegreeoranother,onadequateinfrastructure.Reliableroads,bridges, power sources and water supply are important determinants which affect capital andoperating costs. Lack of such infrastructure or unusual or infrequent weather phenomena,government or other interference in the maintenance or provision of such infrastructure couldadverselyaffecttheCompany'soperations,financialconditionandresultsofoperations.



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ChangesinLocalLegislationorRegulation

The Company's mining and processing operations and exploration activities are subject toextensive laws and regulations governing the protection of the environment, exploration,development, production, exports, taxes, labour standards, occupational health, waste disposal,toxicsubstances,mineandworkersafety,protectionofendangeredandotherspecialstatusspeciesand other matters. The Company's ability to obtain permits and approvals and to successfullyoperate in particular communities may be adversely impacted by real or perceived detrimentaleventsassociatedwith theCompany'sactivitiesor thoseofotherminingcompaniesaffecting theenvironment, human health and safety of the surrounding communities. Delays in obtaining orfailure to obtain government permits and approvals may adversely affect the Company'soperations,includingitsabilitytoexploreordevelopproperties,commenceproductionorcontinueoperations. Failure to comply with applicable environmental and health and safety laws andregulations may result in injunctions, fines, suspension or revocation of permits and otherpenalties. The costs and delays associated with compliance with these laws, regulations andpermits could prevent the Company from proceeding with the development of a project or theoperationorfurtherdevelopmentofamineorincreasethecostsofdevelopmentorproductionandmay materially adversely affect the Company's business, results of operations or financialcondition.TheCompanymayalsobeheldresponsibleforthecostsofaddressingcontaminationatthesiteofcurrentorformeractivitiesoratthirdpartysites.TheCompanycouldalsobeheldliableforexposuretohazardoussubstances.

EnvironmentalMatters

All of theCompany'soperations are andwill be subject to environmental regulations,which canmakeoperationsexpensiveorprohibitthemaltogether.TheCompanymaybesubjecttopotentialrisksandliabilitiesassociatedwithpollutionoftheenvironmentandthedisposalofwasteproductsthat couldoccurasa resultof itsmineralexploration,developmentandproduction. Inaddition,environmentalhazardsmayexistonapropertyinwhichtheCompanydirectlyorindirectlyholdsan interest,whichareunknowntotheCompanyatpresentandhavebeencausedbypreviousorexisting owners or operators of the Company's projects. Environmental legislation provides forrestrictions and prohibitions on spills, releases or emissions of various substances produced inassociationwithcertainminingindustryoperationswhichwouldresultinenvironmentalpollution.Abreachofsuchlegislationmayresultintheimpositionoffinesandpenalties,ortherequirementtoremedyenvironmentalpollution,whichwouldreducefundsotherwiseavailabletotheCompanyandcouldhaveamaterialadverseeffectontheCompany.IftheCompanyisunabletofullyremedyan environmental problem, it could be required to suspend operations or undertake interimcompliance measures pending completion of the required remedy, which could have a materialadverseeffectontheCompany.

There is no assurance that future changes in environmental regulation, if any,will not adverselyaffecttheCompany'soperations. Thereisalsoariskthattheenvironmentallawsandregulationsmay become more onerous, making the Company's operations more expensive. Many of theenvironmental lawsand regulationswill require theCompany toobtainpermits for itsactivities.The Companywill be required to update and review its permits from time to time, andmay besubject to environmental impact analyses and public review processes prior to approval of theadditionalactivities.Itispossiblethatfuturechangesinapplicablelaws,regulationsandpermitsor



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changesintheirenforcementorregulatoryinterpretationcouldhaveasignificantimpactonsomeportionoftheCompany'sbusiness,causingthoseactivitiestobeeconomicallyre‐evaluatedatthattime.

GroupsOpposedtoMiningMayInterferewiththeCompany'sEffortstoExploreandDevelopitsProperties

OrganizationsopposedtominingmaybeactiveintheregionsinwhichtheCompanyconductsitsexplorationactivities. AlthoughtheCompanyintendstocomplywithallenvironmental lawsandmaintaingoodrelationswithlocalcommunities,thereisstillthepossibilitythatthoseopposedtomining will attempt to interfere with the development of the Company's properties. SuchinterferencecouldhaveanimpactontheCompany'sabilitytoexploreanddevelopitspropertiesinamannerthatismostefficientorappropriate,oratall,andanysuchimpactcouldhaveamaterialadverseeffectontheCompany'sfinancialconditionandtheresultsofitsoperations.

MarketforSecuritiesandVolatilityofSharePrice

There can be no assurance that active trading market in the Company's securities will beestablished or sustained. The market price for the Company's securities is subject to widefluctuations.Factorssuchasannouncementsofexplorationresults,aswellasmarketconditionsintheindustryortheeconomyasawhole,mayhaveasignificantadverseimpactonthemarketpriceofthesecuritiesoftheCompany.

The stockmarkethas from time to timeexperiencedextremepriceandvolume fluctuations thathaveoftenbeenunrelatedtotheoperatingperformanceofparticularcompanies.

ConflictsofInterest

TheCompany'sdirectorsandofficersmayserveasdirectorsorofficersofothercompanies, jointventure partners, or companies providing services to the Company or theymay have significantshareholdingsinothercompanies.Situationsmayarisewherethedirectorsand/orofficersoftheCompanymaybeincompetitionwiththeCompany.Anyconflictsofinterestwillbesubjecttoandgovernedbythelawapplicabletodirectors'andofficers'conflictsofinterest.Intheeventthatsucha conflict of interest arises at a meeting of the Company's directors, a director who has such aconflictwillabstainfromvotingfororagainsttheapprovalofsuchparticipationorsuchterms.Inaccordancewithapplicablelaws,thedirectorsoftheCompanyarerequiredtoacthonestly,ingoodfaithandinthebestinterestsoftheCompany.

GeneralEconomicConditions

Global financialmarketshaveexperiencedasharpincreaseinvolatilityduringthelast fewyears.MarketconditionsandunexpectedvolatilityorilliquidityinfinancialmarketsmayadverselyaffecttheprospectsoftheCompanyandthevalueoftheCompany'sshares.



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RelianceonKeyPersonnel

TheCompanyisdependentonthecontinuedservicesofitsseniormanagementteam,anditsabilitytoretainotherkeypersonnel.ThelossofsuchkeypersonnelcouldhaveamaterialadverseeffectontheCompany.TherecanbenoassurancethatanyoftheCompany'semployeeswillremainwiththe Company or that, in the future, the employees will not organize competitive businesses oracceptemploymentwithcompaniescompetitivewiththeCompany.

Furthermore, aspartof theCompany's growth strategy, itmust continue tohirehighlyqualifiedindividuals. There can beno assurance that theCompanywill be able to attract, train or retainqualifiedpersonnelinthefuture,whichwouldadverselyaffectitsbusiness.

RisksRelatedtoFlow‐ThroughShares

Financing of the Companymay involve the issuance of flow‐through common shares under theIncomeTaxAct(Canada). Thereisnoguaranteethattherewillnotbeanydifferencesofopinionbetween theCanadian federalandBritishColumbiaprovincial taxauthoritieswithrespect to thetax treatmentof flow‐through commonshares issuedunder a financing, if any, and theactivitiescontemplatedbytheCompany'sexplorationanddevelopmentprograms.

If the Company does not expend an amount equal to the gross proceeds from the sale of flow‐through common shares so as to incur sufficient qualifying expenditures within the relevanttimeframe, subscribers in the flow‐through financingmay be reassessed. The Company shall beobligatedtoindemnifyanysubscribersofflow‐throughcommonsharesfortaxpayablepursuanttoanysuchreassessmentpursuanttothetermsandconditionssetoutinthesubscriptionagreementsthattheCompanywillenterintowitheachsubscriberinaflow‐throughfinancing.TherecanbenoassurancesthattheCompanywillhavesufficientfundstosatisfysuchobligations.

Competition

Theresourcesindustryishighlycompetitiveinallitsphases,andtheCompanywillcompetewithother mining companies, many of which have greater financial, technical and other resources.Competition inthemining industry isprimarily for: attractivemineralrichpropertiescapableofbeingdevelopedandproducingeconomically;thetechnicalexpertisetofind,developandoperatesuchproperties; the labour tooperate theproperties; and the capital for thepurposeof fundingsuch properties. Many competitors not only explore for and mine certain minerals, but alsoconductproductionandmarketingoperationsonaworldwidebasis.SuchcompetitionmayresultintheCompanybeingunabletoacquiredesiredproperties,torecruitorretainqualifiedemployeesortoacquirethecapitalnecessarytofunditsoperationsanddevelopitsproperties.TheCompany'sinability to compete with other mining companies for these resources could have a materiallyadverseeffectontheCompany'sresultsofoperationanditsbusiness.

UninsurableRisks

Inthecourseofexploration,developmentandproductionofmineralproperties,certainrisks,andinparticular,unexpectedorunusualgeologicaloperatingconditionsincludingrockbursts,caveins,fires, flooding and earthquakesmay occur. It is not always possible to fully insure against such



‐31‐

risksandtheCompanymaydecidenottotakeoutinsuranceagainstsuchrisksasaresultofhighpremiumsorotherreasons.

LandClaims

In Canada, aboriginal interests, rights (including treaty rights), claims and title may existnotwithstandingthattheymaybeunregisteredoroverlapwithothertenuresandinterestsgrantedtothirdparties.Generallyspeaking,thescopeandcontentofsuchrightsarenotwelldefinedandmaybethesubjectof litigationornegotiationwith thegovernment. Thegovernmenthasa legalobligationtoconsultFirstNationsonproposedactivitiesthatmayhaveanimpactonassertedorproven aboriginal interests, claims, rights or title. All of the mineral claims in the Company'sprojects are identified by the Province of British Columbia as overlapping with areas in whichcertain aboriginal groups have asserted aboriginal interests, rights, claims or, title or undefinedrightsunderhistorictreaties.Nevertheless,potentialoverlapsbetweentheCompany'spropertiesand existing or asserted aboriginal interests, rights, claims or, title, or undefined rights underhistorictreaties,mayexistnotwithstandingwhethertheProvinceofBritishColumbiahasidentifiedsuchinterests,rights,claimsor,title,orundefinedrightsunderhistorictreaties.

PropertyTitle

Theacquisitionoftitletoresourcepropertiesisaverydetailedandtimeconsumingprocess.Titleto,andtheareaof,resourceclaimsmaybedisputed.AlthoughtheCompanybelievesithastakenreasonablemeasures toensurethat title to themineralclaimscomprisingpartof itsprojectsareheldasdescribed,there isnoguaranteethattitletoanyofthoseclaimswillnotbechallengedorimpaired. Theremaybevalidchallenges to the titleof anyof themineral claimscomprising theCompany'sprojectsthat,ifsuccessful,couldimpairdevelopmentoroperationsorboth.

TheMineralPropertyUnderlyingtheCompany'sNetSmelterReturnRoyaltyInterestContainsnoKnownOre

The Company holds a 1% net smelter return ("NSR") royalty interest on the Quartz MountainProperty (recently renamed "Angel's Camp"), an exploration stage prospect in Oregon. TheCompany's interest in thepropertywill be limited to any futureNSR thatwouldbe forthcomingonlyiforwhenanyminingcommencesontheproperty.Thereiscurrentlynoknownbodyoforeon the property. Extensive additional exploration work will be required to ascertain if anymineralizationmaybeeconomic.

QUARTZ MOUNTAIN RESOURCES LTD.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2013 AND 2012

(Expressed in Canadian Dollars, unless otherwise stated)

INDEPENDENT AUDITORS' REPORT

To the Shareholders of

Quartz 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, 2013 and 2012 and the consolidated statements of loss and comprehensive loss,

changes in equity and cash flows for the years then ended, 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 International Financial Reporting Standards, 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. Those standards require that we comply with

ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated 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, 2013 and 2012 and its financial performance and its cash flows for the years then

ended in accordance with International Financial Reporting Standards.

Emphasis of Matter

The accompanying consolidated financial statements have been prepared assuming that Quartz Mountain Resources Ltd. will

continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has a working

capital deficit and there can be no assurance the Company can achieve positive cash flows which raise substantial doubt

about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

“DAVIDSON & COMPANY LLP”

Vancouver, Canada Chartered Accountants

October 21, 2013

QUARTZ MOUNTAIN RESOURCES LTD.Consolidated Balance Sheets

(Expressed in Canadian Dollars (note 2))

July 31 July 31

2013 2012

ASSETS

Current assets

Cash and cash equivalents (note 4(a)) 706,393$ 2,450,451$

Amounts receivable and other assets (note 5) 143,487 292,837

Total current assets 849,880 2,743,288

Non-current assets

Restricted cash (note 4(b)) 158,387 78,000

Amounts receivable and other assets (note 5) 440,000 –

Mineral property interests (note 6) 1,021,547 1

Total non-current assets 1,619,934 78,001

Total assets 2,469,814$ 2,821,289$

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

Current liabilities

Amounts payable and other liabilities (note 8) 136,137$ 607,389$

Flow-through share premium (note 10) 35,639 411,009

Due to related parties (note 11) 2,421,220 813,855

Total current liabilities 2,592,996 1,832,253

Convertible debenture (note 9) 600,000 –

Total long-term liabilities 600,000 –

Shareholders' equity (deficiency)

Share capital (note 7) 26,050,118 24,514,381

Reserves (notes 2 and 7) 592,011 381,139

Accumulated deficit (27,365,311) (23,906,484)

Total shareholders' equity (deficiency) (723,182) 989,036

Total liabilities and shareholders' equity (deficiency) 2,469,814$ 2,821,289$

Nature and continuance of operations (note 1)

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

James Kerr Ronald W. Thiessen

Director Director

4

QUARTZ MOUNTAIN RESOURCES LTD.Consolidated Statements of Loss and Comprehensive Loss


For the year ended July 31

2013 2012

Expenses (note 12):

Exploration and evaluation 3,880,441$ 2,246,650$

Assays and analysis 359,928 52,745

Drilling 265,336 –

Engineering 21,518 8,400

Environmental 610 1,375

Geological 1,560,270 870,517

Graphics 47,464 13,006

Property payments 83,962 910,819

Site activities 723,338 143,544

Socio-economic 34,333 89,646

Transportation 690,565 100,914

Travel and accommodation 93,117 55,684

General and administration 1,359,322 1,166,252

Conferences and travel 40,197 31,357

Legal, accounting and audit 61,634 301,641

Office and administration 123,215 70,140

Regulatory, trust and filing 45,371 48,659

Salaries and benefits 1,038,364 686,358

Shareholder communications 50,541 28,097

Equity-settled share-based payments (note 7(c)) 210,872 381,139

(5,450,635) (3,794,041)

Other items

Flow-through share premium (note 10) 462,990 193,308

Interest income 10,984 13,067

Interest expense (40,326) –

Foreign exchange loss (349) (139)

Gain on disposition of a mineral property interest (note 6(a)) 1,578,969 –

Tax related to flow-through financing (note 10) (20,460) –

Loss before income tax (3,458,827) (3,587,805)

Income tax (note 14) – –

Loss and comprehensive loss for the year (3,458,827) (3,587,805)

Basic and diluted loss per common share (0.13)$ (0.20)$

Weighted average number of common shares outstanding 26,223,006 18,396,348


5

QUARTZ MOUNTAIN RESOURCES LTD.Consolidated Statement of Changes in Equity (Deficiency)


Share Capital Reserves

Number Amount

Translation

reserve

(note 2)

Equity-settled

share-based

payments

Accumulated

deficit

Total

shareholders'

equity

(deficiency)

Balance at July 31, 2011 13,399,422 29,407,744$ (331,903)$ –$ (29,018,774)$ 57,067$

Functional currency translation adjustment (note 2) (9,031,998) 331,903 – 8,700,095 –

Balance at August 1, 2011 13,399,422 20,375,746 – – (20,318,679) 57,067

Loss for the year – – – (3,587,805) (3,587,805)

Equity-settled share-based payments (note 7(c)) – – 381,139 – 381,139

Shares issued for cash, net of issuance costs (note 7(b)) 7,183,371 3,434,635 – – – 3,434,635

Shares issued for property option payments (note 6) 1,450,000 704,000 – – – 704,000

Balance at July 31, 2012 22,032,793 24,514,381$ –$ 381,139$ (23,906,484)$ 989,036$

Balance at August 1, 2012 22,032,793 24,514,381$ –$ 381,139$ (23,906,484)$ 989,036$

Loss for the year – – – – (3,458,827) (3,458,827)

Equity-settled share-based payments (note 7(c)) – – – 210,872 – 210,872

Shares issued for cash, net of issuance costs (note 7(b)) 2,214,323 528,160 – – – 528,160

Shares issued for property option payment (note 6) 3,052,397 1,007,577 – – – 1,007,577

Balance at July 31, 2013 27,299,513 26,050,118$ –$ 592,011$ (27,365,311)$ (723,182)$


6

QUARTZ MOUNTAIN RESOURCES LTD.Consolidated Statements of Cash Flows


For the year ended July 31

2013 2012

Cash flows from operating activities:

Loss for the year (3,458,827)$ (3,587,805)$

Adjusted for:

Equity-settled share-based payments (note 7(c)) 210,872 381,139

Foreign exchange 349 139

Flow-through share premium (note 10) (462,990) (193,308)

Gain on disposition of a mineral property interest (note 6(a)) (1,578,969) –

Interest expense 40,326 –

Property option payments paid through issuance of shares (note 6) 5,000 704,000

Restricted cash (note 4(b)) (80,387) (78,000)

Changes in non-cash working capital items:

Amounts receivable and other assets - current 149,350 (272,260)

Amounts payable and other liabilities (474,310) 565,226

Due to related parties 1,607,365 813,855

Amounts receivable and other assets - non-current (200,000) –

Net cash used in operating activities (4,242,221) (1,667,014)

Cash flows from investing activities:

Acquisition of mineral property (note 6(a)) (50,000) –

Disposition of mineral property interest (note 6(a)) 2,000,000 –

Net cash provided by investing activities 1,950,000 –

Cash flows from financing activities:

Proceeds from issuance of share capital, net of issue costs (note 7(b)) 615,780 4,038,952

Principal payment on convertible debenture (note 6(a)) (30,000) –

Interest paid on convertible debenture (37,268) –

Net cash provided by financing activities 548,512 4,038,952

(Decrease) increase in cash and cash equivalents (1,743,709) 2,371,938

Effect of exchange rate fluctuations on cash held (349) (139)

(1,744,058) 2,371,799

Cash and cash equivalents, beginning of year 2,450,451 78,652

Cash and cash equivalents, end of year (note 4(a)) 706,393$ 2,450,451$

Supplementary cash flow information:

Non cash investing and financing activities:

Property option payments paid through issuance of shares (note 6) 5,000$ 704,000$

Property acquisition costs paid through issuance of shares (note 6) 1,002,577 –

Property acquisition costs paid through issuance of convertible debenture (note 6) 650,000 –

Portion of debenture assumed by Amarc (note 6) 240,000


7

Quartz Mountain Resources Ltd. Notes to the Consolidated Financial Statements For the years ended July 31, 2013 and 2012 (Expressed in Canadian Dollars, unless otherwise stated)

8

1. NATURE AND CONTINUANCE OF OPERATIONS

Quartz Mountain Resources Ltd. ("Quartz Mountain" or the "Company") is a Canadian public company incorporated in British Columbia on August 3, 1982. The Company's corporate office is located at 1040 West Georgia Street, 15th Floor, Vancouver, British Columbia, Canada. The Company is primarily engaged in the acquisition and exploration of mineral properties.

These consolidated financial statements (the "Financial Statements") of the Company as at and for the year ended July 31, 2013 include Quartz Mountain Resources Ltd. and its subsidiary (together referred to as the "Company"). Quartz Mountain Resources Ltd. is the ultimate parent entity of the group.

The Company is in the process of acquiring and exploring mineral property interests. The Company's continuing operations are entirely dependent upon the existence of economically recoverable mineral reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of these projects, obtaining the necessary permits to mine, on future profitable production of any mine and the proceeds from the disposition of the mineral property interests.

These Financial Statements have been prepared on a going concern basis which contemplates the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future. As at July 31, 2013, the Company had cash and cash equivalents of $0.7 million, a working capital deficit of $1.7 million, and accumulated losses of $27.4 million since inception.

Of the total current liabilities of $2.6 million at July 31, 2013, $2.4 million is payable to Hunter Dickinson Services Inc. ("HDSI"), a related party (note 11(b)). The Company has received a confirmation from HDSI that HDSI will continue to provide services to the Company and will not demand repayment of amounts outstanding, prior to November 1, 2014. However, there is no guarantee or amended agreement and as such the amount is presented as a current obligation.

Management believes that it is able to maintain its mineral rights in good standing for the next 12 month period. Additional debt or equity financing will be required to fund exploration or development programs. The Company has a reasonable expectation that additional funds will be available when necessary to meet ongoing exploration and development costs. However, there can be no assurance that the Company will continue to obtain additional financial resources and/or achieve profitability or positive cash flows. If the Company is unable to obtain adequate additional financing, the Company will be required to re-evaluate its planned expenditures until additional funds can be raised through financing activities. These material uncertainties cast significant doubt on the ability of the Company to continue as a going concern.

2. CHANGE OF PRESENTATION AND FUNCTIONAL CURRENCY

Following the decision to acquire and explore mineral property interests in Canada (note 6), the Company's cash flows were anticipated to be principally denominated in Canadian dollars. Accordingly, effective August 1, 2011, the Company changed both the functional currency of the


9

Company and the currency in which it presents its consolidated financial statements, from United States dollars ("USD") to Canadian dollars ("CAD").

A change in presentation currency is accounted for as a change in accounting policy and is applied retrospectively, as if the new presentation currency had always been the presentation currency. Consequently, comparative figures for years prior to the effective date of August 1, 2011 have been restated to be presented in Canadian dollars using average exchange rates for income and expenses and the closing rate at the balance sheet date for assets, liabilities and items related to equity. Share capital and accumulated deficit have been translated using historic rates. Resulting exchange differences were recognized within equity.

3. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

These Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and the International Financial Reporting Interpretations Committee (“IFRIC”) effective for the Company's year ended July 31, 2013.

Issuance of these Financial Statements was authorized on October 21, 2013 by the Board of Directors.

(b) Basis of presentation

These Financial Statements have been prepared on a historical cost basis, except for financial instruments measured at fair value. In addition, these Financial Statements have been prepared using the accrual basis of accounting, except for cash flow information.

(c) Significant accounting estimates and judgments

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The impact of such estimates is pervasive throughout the financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Changes in the subjective inputs and assumptions can materially affect fair value estimates.


10

Specific areas where significant estimates or judgements exist are:

Sources of estimation uncertainty:

• Management determines costs for share-based payments using market-based valuation techniques. The fair value of the market-based and performance-based share awards are determined at the date of grant using generally accepted valuation techniques. Assumptions are made and judgment used in applying valuation techniques. These assumptions and judgments include estimating the future volatility of the stock price, expected dividend yield, future employee turnover rates and future employee stock option exercise behaviors and corporate performance. Such judgments and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates;

• Estimate for the accrual of the Mineral Exploration Tax Credit ("METC"). The METC initiative was introduced by the government of British Columbia to stimulate mineral exploration activity in the province and includes an enhanced credit for mineral exploration in areas affected by the mountain pine beetle infestation. The Company is eligible to receive refunds under this tax credit. However, the timing and amounts of refunds pursuant to the METC program are uncertain as these amounts are subject to government audit;

• Estimated fair values of mineral properties acquired or disposed;

• Provisions for income taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that at some future date an additional liability could result from audits by taxation authorities. Where the final outcome of these tax-related matters is different from the amounts that were originally recorded, such differences will affect the tax provisions in the period in which such determination is made;

• Valuation of shares issued in non-cash transactions are measured at the fair value of the equity instruments granted based on quoted market prices on the date of grant or per the terms of the contract; and

• Estimate of the Company’s borrowing rate at a rate consistent with the rate charged on the convertible debenture.


11

Critical accounting judgments:

• Assessment of the Company's ability to continue as a going concern;

• The recoverability of the carrying value of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest. The carrying value of these assets is reviewed by management when events or circumstances indicate that its carrying value may not be recovered. If impairment is determined to exist, an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount;

• The classification of the option agreements in respect of the Buck Property and the Hotai Claims as earn-in agreements, as opposed to the acquisition of mineral property interests, has been identified as an accounting policy which involves judgments or assessments made by management. Currently a feasibility study has not been completed on any of these properties to determine if the properties are capable of supporting commercial production; consequently the costs associated with these properties are expensed as incurred;

• Information about the judgements used in the classification of the joint arrangement entered into during the year is provided in note 6(a). Judgment is required in assessing whether the arrangement is jointly controlled by all of its parties or by a group of the parties, or controlled by one of its parties alone; and

• Management is required to assess the functional currency of each entity of the Company. In concluding that the Canadian dollar is the functional currency of the parent and of its subsidiary, management considered the currency that mainly influences the cost of providing goods and services in each jurisdiction in which the Company operates.

(d) Basis of consolidation

These Financial Statements include the accounts of the Company and its subsidiary.

Subsidiaries are all entities over which the Company has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company.

Inter-company balances and transactions, including any unrealized income and expenses arising from inter-company transactions, are eliminated on consolidation. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no impairment.

At July 31, 2013 and July 31, 2012 the Company held an ownership interest in the following subsidiary:

Name of Subsidiary Place of Incorporation Ownership Interest Principal Activity

Wavecrest Resources Inc. Delaware 100% Holding company


12

(e) Foreign currency

The functional and presentation currency of the Company and its subsidiary, as at July 31, 2013, is the Canadian dollar (note 2).

Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing on the dates of transactions. At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at the period end date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated. Gains and losses arising on translation are included in profit or loss for the period.

(f) Financial instruments

Financial assets and liabilities are recognized when the Company becomes party to the contracts that give rise to them. The Company determines the classification of its financial assets and liabilities at initial recognition and, where allowed and appropriate, re-evaluates such classification at each financial year end. The Company does not have any derivative financial instruments.

Non-derivative financial assets:

The Company classifies its non-derivative financial assets into the following categories:

Cash and cash equivalents

Cash and cash equivalents are comprised of cash and short term deposits held at major financial institutions, which are readily convertible into a known amount of cash. The Company's cash and cash equivalents are invested in business and savings accounts which are available on demand by the Company for its programs. They are measured at fair value.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are initially recognized at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses.

Loans and receivables comprise amounts receivable and restricted cash.

Non-derivative financial liabilities:

The Company's non-derivative financial liabilities comprise financial liabilities measured at amortized cost. Such financial liabilities are recognized initially at fair value net of any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest method. Financial liabilities measured at amortized cost comprise amounts payable and other liabilities, balances payable to related parties and a convertible debenture.


13

Impairment of financial assets:

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organization.

For certain categories of financial assets, such as amounts receivable, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of amounts receivable, where the carrying amount is reduced through the use of an allowance account. When an amount receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

(g) Exploration and evaluation expenditures

Exploration and evaluation expenditures are expenditures incurred by the Company in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.

Exploration and evaluation expenditures are expensed as incurred, except for initial expenditures associated with the acquisition of exploration and evaluation assets through a business combination or an asset acquisition.

Exploration and evaluation expenditures include the cash consideration and the estimated fair market value of common shares on the date of issue or as otherwise provided under the relevant agreements.

Costs for properties for which the Company does not possess unrestricted ownership and exploration rights, such as option agreements, are expensed in the period incurred or until a feasibility study has determined that the property is capable of commercial production.

Administrative expenditures related to exploration activities are expensed in the period incurred.


14

Mineral property interests

Expenditures incurred by the Company in connection with the exploration for and evaluation of mineral resources after the technical feasibility and commercial viability of extracting a mineral resource are demonstrable are capitalized. Such amounts are then amortized over the estimated life of the property following the commencement of commercial production, or are written off if the property is sold, allowed to lapse or abandoned, or when an impairment has been determined to have occurred.

Mineral property interests, if any, are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount.

Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, mineral property interests attributable to that area of interest are first tested for impairment and then reclassified to mineral property and development assets within property, plant and equipment.

Recoverability of the carrying amount of mineral property interests is dependent on successful development and commercial exploitation, or alternatively, a sale of the respective areas of interest.

(h) Impairment of non-financial assets

At the end of each reporting period the carrying amounts of the Company's assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of: fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm's length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in the profit or loss for the period. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.


15

(i) Share capital

Common shares are classified as equity. Transaction costs directly attributable to the issuance of common shares and share purchase options are recognized as a deduction from equity, net of any tax effects.

Flow–through shares

Canadian tax legislation permits mining entities to issue flow–through shares to investors. Flow–through shares are securities issued to investors whereby the deductions for tax purposes related to eligible Canadian exploration expenses ("CEE"), as defined in the Income Tax Act (Canada), may be claimed by investors instead of the entity, pursuant to a defined renunciation process.

Renunciation may occur:

• prospectively (namely, the flow–through shares are issued, renunciation occurs and CEE are incurred subsequently); or

• retrospectively (namely, the flow–through shares are issued, CEE are then incurred, and renunciation occurs subsequently).

Flow–through shares are recorded in share capital at the fair value of common shares on date of issuance. When flow–through shares are issued, the difference between the fair value of non-flow-through common shares and the amount the investors pay for flow–through shares is recorded as a deferred liability called "flow-through share premium". This deferred liability is credited to profit or loss when the eligible expenses are incurred and renounced to investors.

Upon eligible expenses being incurred, the Company derecognizes the liability and recognizes a deferred tax liability, if any, for the amount of tax reduction renounced to shareholders. The premium is recognized as other income and the related deferred tax is recognized as a tax provision.

(j) Loss per share

The Company presents basic and diluted loss per share data for its common shares, calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted loss per share does not adjust the loss attributable to common shareholders or the weighted average number of common shares outstanding when the effect is anti-dilutive.

(k) Share-based payments

The cost of equity-settled transactions with employees is measured by reference to the fair value of the instruments issued at the date at which they are granted and is recognized as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined using an appropriate pricing model. In valuing equity-settled transactions, no account is taken of any vesting conditions.


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The cost of equity-settled transactions with non-employees is measured by reference to the fair value of the instruments issued, on the basis that the fair value of the services received cannot be estimated reliably. Fair value is originally measured at the date at which they are granted and subsequently re-measured at each balance sheet date for any unvested portion, and is recognized as an expense over the vesting period, which ends on the date on which the relevant non-employees become fully entitled to the award. Fair value is determined using an appropriate pricing model.

In valuing equity-settled transactions, no account is taken of any vesting conditions. Vesting conditions are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount, based on an estimate of the number of equity instruments expected to vest so that, ultimately, the amount recognized for goods or services received as consideration for the equity instruments granted will be based on the number of equity instruments that eventually vest. On the vesting date, the Company revises the estimate to equal the number of equity instruments that ultimately vested.

At each balance sheet date prior to vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's estimates of the achievement or otherwise of non-market conditions and of the number of equity instruments that will ultimately vest. The movement in cumulative expense from amounts previously recorded is recognized in profit or loss, with a corresponding entry in equity.

Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognized over the original vesting period. In addition, any expense is recognized over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognized if this difference is negative.

Where an equity-settled award is cancelled, any cost not yet recognized in profit or loss for the award shall not be recognized and any previous amounts recognized for awards that have not vested are reversed.

(l) Rehabilitation provision

Statutory, contractual and constructive obligations to incur restoration, rehabilitation and environmental costs arise when environmental disturbance is caused by the exploration or development of an exploration and evaluation asset. Such costs are discounted to their estimated net present value and capitalized to the carrying amount of the asset, along with a corresponding liability, as soon as the obligation to incur such costs arises. The timing of the actual rehabilitation expenditure is dependent on a number of factors such as the life and nature of the asset, the operating license conditions and, when applicable, the environment in which the mine operates.

Discount rates reflecting the time value of money are used to calculate the net present value, where applicable. These costs are charged against profit or loss over the economic life of the related asset, through amortization using either the unit-of-production or the straight line method. The corresponding liability is progressively increased as the effect of discounting unwinds, creating an expense recognized in profit or loss.


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Decommissioning costs are also adjusted for changes in estimates. Those adjustments are accounted for as a change in the corresponding capitalized cost, except where a reduction in costs is greater than the unamortized capitalized cost of the related assets, in which case the capitalized cost is reduced to nil and the remaining adjustment is recognized in profit or loss.

The operations of the Company have been, and may in the future be, affected from time to time in varying degree by changes in environmental regulations, including those for site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company are not predictable.

(m) Income taxes

Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year end, adjusted for amendments to tax payable with regards to previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

The following temporary differences are not provided for:

• goodwill not deductible for tax purposes;

• the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and

• differences relating to investments in subsidiaries, associates, and joint ventures to the extent that they will probably not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period applicable to the period of expected realization or settlement.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

(n) Government assistance

When the Company is entitled to receive mineral exploration tax credits and other government grants, these government assistances are recognized as a cost recovery within exploration and evaluation expenditures when there is reasonable assurance of their recovery.


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(o) Compound financial instruments

Compound financial instruments issued by the Company comprise a convertible debenture that can be converted into a fixed number of the Company's common shares at the option of the holder.

The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component, if any, is recognized initially as the difference between the estimated fair value of the compound financial instrument as a whole and the estimated fair value of the liability component. Material directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

(p) Joint venture activities and joint controlled operations

Joint control is defined as the contractually agreed sharing of control over an economic activity, and exists only when the strategic, financial and operating decisions essential to the relevant activities require the unanimous consent of the parties sharing control. When the Company enters into agreements that provide for specific percentage interests in exploration properties, a portion of the Company's exploration activities is conducted jointly with others, without establishment of a corporation, partnership or other entity.

Under IFRS 11 "Joint Arrangements", this type of joint control of mineral assets and joint exploration and/or development activities is considered as a joint operation, which is defined as a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

In its financial statements, the Company recognizes the following in relation to its interest in a joint operation:

• its assets, including its share of any assets held jointly;

• its liabilities, including its share of any liabilities incurred jointly;

• its revenue from the sale of its share of the output of the joint operation; and

• its expenses, including its share of any expenses incurred jointly

(q) Accounting standards, interpretations and amendments to existing standards

Effective August 1, 2012, the Company adopted new and revised IFRS that were issued by the IASB. The application of these new and revised IFRS has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.


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Accounting policies adopted in the current year:

(i) Amendments to IFRS 7 Financial Instruments Disclosures("IFRS 7") and IAS 12 Income Taxes

("IAS 12")

Effective April 1, 2012, the Company adopted amendments to IFRS 7 and the amendments to IAS 12 which were issued by the International Accounting Standards Board ("IASB"). The application of these amended IFRS has not had a material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.

(ii) IFRS 10 "Consolidated Financial Statements" and amendments to IAS 27 "Separate Financial

Statements"

Effective August 1, 2012, the Company early adopted IFRS 10 and the amended IAS 27.

IFRS 10 replaces IAS 27 "Consolidated and separate financial statements" and SIC-12 "Consolidation – Special Purpose Entities". Retrospective application is required, unless impracticable, in which case the Company applies it from the earliest practicable date.

IAS 27 was amended following the issuance of IFRS 10 to reflect the accounting for subsidiaries, associates and joint ventures in the separate financial statements of the parent company.

The Company has applied these new and amended standards retrospectively. The above standards did not result in material changes to the Company’s financial statements.

(iii) IFRS 11 "Joint Arrangements"

Effective August 1, 2012, the Company early adopted IFRS 11.

IFRS 11 supersedes IAS 31 "Interests in Joint Ventures" and SIC-13 "Jointly Controlled Entities – Nonmonetary Contributions by Venturers", which had allowed entities the choice to proportionately consolidate or equity account for interests in joint ventures.

IFRS 11 requires a venturer to classify its interest in a joint arrangement as either a joint venture or a joint operation. Joint ventures are accounted for using the equity method of accounting. For a joint operation the venturer recognizes its share of the assets, liabilities, revenues and expenses of the joint operation.

The Company has adopted this standard retrospectively. The above standards did not result in material changes to the Company’s previously filed financial statements.

(iv) IFRS 12 "Disclosure of Interests in Other Entities"

Effective August 1, 2012, the Company early adopted IFRS 12.

IFRS 12 requires the Company to disclose the significant judgements and assumptions it has made in determining the nature of its interest in another entity or arrangement, and in determining the type of joint arrangement in which it has an interest, and information


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about its interests in subsidiaries, joint arrangements and associates, and other structured entities.

Accounting standards issued but not yet effective:

(i) Effective for annual periods beginning on or after January 1, 2013

• IFRS 13, Fair Value Measurement

• IAS 19, Employee Benefits

• IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine

(ii) Effective for annual periods beginning on or after January 1, 2014

• IAS 32, Financial Instruments – Presentation

(iii) Effective for annual periods beginning on or after January 1, 2015

• IFRS 9, Financial Instruments – Recognition and measurement

The Company has not early adopted these new standards, interpretations or amendments to existing standards. The Company is currently assessing the impact that the standards, which have not been early adopted, will have on the Company's financial statements.

4. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

(a) Cash and cash equivalents

July 31, 2013 July 31, 2012

Business and savings accounts $ 706,393 $ 2,450,451

(b) Restricted cash

Restricted cash in the amount of $158,387 (July 31, 2012 – $78,000) consists of guaranteed investment certificates held in support of explorations permits.


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5. AMOUNTS RECEIVABLE AND OTHER ASSETS

July 31, 2013 July 31, 2012

Current:

Harmonized sales tax receivable $ 17,679 $ 280,777

Prepaid insurance 5,808 7,060

Other receivables 120,000 5,000

Total $ 143,487 $ 292,837

Non-current: Other receivable (note 6) $ 240,000 $ –

British Columbia Mineral Exploration Tax Credit 200,000 –

Total $ 440,000 $ –

6. MINERAL PROPERTY INTERESTS

(a) Galaxie Project

Payable to

Finsbury Payable to

Bearclaw Total

Estimated fair value of the Company's shares issued 2,038,111 common shares to Finsbury, and 1,000,000 common shares to Bearclaw $ 672,577 $ 330,000 $ 1,002,577

Cash payment – 50,000 50,000

Convertible debenture (note 7) – 650,000 650,000

Recognized as a mineral property interest 672,577 1,030,000 1,702,577

Disposition of 40% to Galaxie joint arrangement (681,031)

Galaxie Project balance as of July 31, 2013 $ 1,021,546

At July 31, 2013, the Galaxie Project comprised the Galaxie Claims and the Hotai Claims and consisted of 316 mineral claims covering an area of approximately 1,204 square kilometres. The Galaxie Project straddles the Stewart-Cassiar Highway, and is located 24 kilometres south of the community of Dease Lake, British Columbia.

In August 2012, the Company acquired the Galaxie Project by

• issuing 2,038,111 shares to Finsbury Exploration Ltd. ("Finsbury"),

• issuing 1,000,000 shares to Bearclaw Capital Corp. ("Bearclaw").

• making a cash payment of $50,000 to Bearclaw, and

• issuing a $650,000 convertible debenture (the "Debenture") (note 9) to Bearclaw.


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The common shares issued to Finsbury and Bearclaw were valued at the fair market value at the date of issuance ($0.33 per common share). Bearclaw retains a 1% net smelter returns royalty on the Gnat Pass Property (wholly contained within the Galaxie Claims), capped at aggregate payments of $7,500,000 (the "Gnat Pass Royalty Agreement").

November 2012 agreement with Amarc

In November 2012, the Company entered into a letter agreement (the "November 2012 Letter Agreement") with Amarc Resources Ltd. ("Amarc") whereby Amarc could earn up to a 50% interest in the Galaxie and ZNT (note 6(b)) properties (the “Galaxie ZNT Project”). The Company and Amarc have certain directors in common. The Company and Amarc agreed to conduct exploration activities at the Galaxie ZNT Project as an unincorporated joint arrangement (the “Joint Arrangement”), upon Amarc earning its initial interest in these properties, whereby the Company would transfer into the joint arrangement its interest in the properties including its obligations under the related acquisition agreements, the Gnat Pass Royalty Agreement, and its, at the time $650,000 and now $600,000 convertible debenture, of which Amarc would assume 40% (note 5).

Amarc earned an initial 40% interest in the Galaxie ZNT Project by paying to the Company $1,000,000 in cash and also funding $1,000,000 of exploration expenses, to be incurred by the Company on the Galaxie property. The cash payment and exploration funding were completed on December 31, 2012.

The Company recognized a gain of $1,578,969 in relation to the 40% disposition of its mineral property interest to the Joint Arrangement.

June 2013 agreement with Amarc

Effective June 26, 2013, the Company and Amarc entered into an amendment agreement (the "Amendment") whereby the Galaxie ZNT Project was split into two separate joint arrangements, named the "Galaxie Joint Venture" and the "ZNT Joint Venture". Each joint arrangement continues to be governed by the terms of the November 2012 letter agreement.

Under the Amendment, Amarc has an option until October 31, 2013 to increase its interest in each of the ZNT Joint Venture and Galaxie Joint Venture from its current 40% interest to a 60% interest by funding exploration expenditures of $210,000 and $235,000, respectively.

July 2013 agreement with debenture holder

In July 2013, the terms of the Debenture were amended. The Joint Arrangement made a $50,000 principal payment on the Debenture, the interest rate was increased to 10% per annum, and the maturity date was extended to October 31, 2014 (note 5 and 9).

Hotai Claims

The Hotailuh Slope mineral claims (the "Hotai Claims") comprise 35 mineral claims totalling 14,633 hectares located in central British Columbia adjacent to, and forming part of, the Galaxie Project.


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In July 2012, the Company entered into a mineral property purchase agreement (the "Purchase Agreement") with certain arm's length private parties (the "Sellers") to acquire a 100% interest in the Hotai Claims.

Pursuant to the Purchase Agreement, in order to purchase its interest in the Hotai Claims, the Company made a cash payment of $5,000 and issued $5,000 worth of shares in the Company to the Sellers. The number of common shares required to be issued was calculated using the volume weighted-average market share price for the ten days prior to issuance. On August 1, 2012, 14,286 common shares were issued to the Sellers.

After the reporting period, in September 2013, the option for the Hotai Claims was terminated.

(b) ZNT Project

The ZNT Project comprises 84 mineral claims located approximately 15 kilometres southeast of the town of Smithers, in central British Columbia. The Company paid claim staking costs of approximately $57,000 relating to these claims

In November 2012, the Company entered into a letter agreement with Amarc pursuant to which Amarc acquired an option to earn up to a 50% interest in the ZNT property. This agreement was amended in June 2013 to allow Amarc to earn up to a 60% interest in the ZNT property (note 6(a)).

(c) Buck Project

In December 2011, the Company purchased an option (the "Option") to acquire a 100% interest in the Buck gold-silver property (the "Buck Project") located in central British Columbia, by paying $100,000 in cash and issuing 1,200,000 common shares to the vendor. The common shares issued were valued at the estimated fair value on the date of issue ($0.50 per common share) and were expensed along with the cash consideration paid.

The Company was also required to make certain scheduled payments to the underlying owners of the Buck Project (the "Underlying Owners"). The Company paid a total of $45,000 cash and issued 250,000 common shares valued at $104,000 to the Underlying Owners. The common shares were valued based on the estimated fair value on the date of issuance and were expensed along with the cash consideration paid in the prior year.

In July 2013, the Option for the Buck Project was terminated.

(d) Angel's Camp Property

The Company retains a 1% net smelter return royalty payable to the Company on any production from the Angel's Camp property located in Lake County, Oregon. The Angel's Camp property is currently held by Alamos Gold Inc.

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


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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, then to Golden Predator Corporation, and is now named Americas Bullion Royalty Corp (TSX:AMB).

In April 2012, Orsa Ventures Corp. (“Orsa”) (TSX-V: ORN) exercised its option to acquire all of Seabridge's remaining undivided 50% beneficial joint venture interest in the Angel's Camp property. In March 2013, Orsa announced it had entered into an agreement with Americas Bullion Royalty Corp. to acquire, over a number of years, the 50% of Angel’s Camp that it did not own. Additionally, in March 2013 Orsa announced that it had received regulatory approval for, and fulfilled closing requirements for the joint venture purchase agreement with Americas Bullion Royalty Corp. to acquire their 50% joint venture interest in the Angel's Camp Property.

After the reporting period, in September 2013, Alamos Gold Inc. reported the completion of the acquisition of all of the issued and outstanding common shares of Orsa Ventures Corp.

The royalty has been recorded at a nominal amount of $1.

7. CAPITAL AND RESERVES

(a) Authorized share capital

At July 31, 2013, the authorized share capital of the Company comprised an unlimited number of common shares without par value and an unlimited number of preferred shares without par value.

No preferred shares have been issued to date. All issued common shares are fully paid.


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Reconciliation of changes in share capital:

Issued share capital Number of

common shares Amount

Balance at August 1, 2011 13,399,422 $ 20,375,746

Common shares issued for cash, December 2011 1,140,200 570,100

Flow–through common shares issued for cash, December 2011 6,043,171 3,625,902

Recorded as flow–through share premium liability – (604,317)

Share issuance costs, December 2011 – (157,050)

Shares issued for property option payment 1,450,000 704,000

Balance, July 31, 2012 22,032,793 24,514,381

Common shares issued for cash, December 2012 461,914 115,479

Flow–through common shares issued for cash, December 2012 1,752,409 525,723

Recorded as flow–through share premium liability (note 10) – (87,620)

Share issuance costs, December 2012 – (25,422)

Shares issued for Galaxie property acquisition (note 6(a)) 3,038,111 1,002,577

Shares issued for Hotai property option payment (note 6(a)) 14,286 5,000

Balance at July 31, 2013 27,299,513 $ 26,050,118

(b) Private Placement and Flow-Through Financing

In December 2012, the Company completed a non-brokered private placement (the "Private Placement") of 2,214,323 common shares for aggregate gross proceeds of $641,202. The Private Placement was comprised of:

• 461,914 non-flow-through common shares issued at a price of $0.25 per share for gross proceeds of $115,479; and

• 1,752,409 flow-through common shares issued at $0.30 per share, including a premium of $0.05 per share over the offering price for the non-flow through common shares, for gross proceeds of $525,723 (the "Flow-through Funds").

After issuance costs of $25,422, net cash proceeds from the Private Placement were $615,780, of which $87,620 was recorded as a flow-through share premium liability (note 10) and the balance of $528,160 was allocated to the common shares issued.

Pursuant to the flow-through share agreements, the Company renounced eligible Canadian Exploration Expenses ("CEE"), as defined in the Income Tax Act (Canada).


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In December 2011, the Company completed a non-brokered private placement (the "Private Placement") of 7,183,371 common shares for aggregate gross proceeds of $4,196,002. The Private Placement was comprised of:

• 1,140,200 non-flow-through common shares issued at a price of $0.50 per share for gross proceeds of $570,100; and

• 6,043,171 flow-through common shares issued at $0.60 per share, including a premium of $0.10 per share over the offering price for the non-flow through common shares, for gross proceeds of $3,625,902 (the "Flow-through Funds").

After issuance costs of $157,050, net cash proceeds from the Private Placement were $4,038,952, of which $604,317 was recorded as a flow-through share premium liability (note 10) and the balance of $3,434,635 was allocated to the common shares issued.

Pursuant to the flow-through share agreements, the Company renounced eligible Canadian Exploration Expenses ("CEE"), as defined in the Income Tax Act (Canada).

(c) Equity-Settled Share-Based Payments

The Company has a share purchase option plan approved by the Company's shareholders that allows the Board of Directors to grant share purchase options, subject to regulatory terms and approval, to its officers, directors, employees, and service providers. The share purchase option plan (the "2012 Option Plan") is based on the maximum number of eligible shares equaling 10% of the Company's outstanding common shares, calculated from time to time.

The exercise price of each share purchase option is set by the Board of Directors at the time of grant but cannot be less than the five day volume weighted average trading price of the Company's shares calculated on the day prior to the grant. Share purchase options may have a maximum term of ten years (although share purchase options have generally been granted with a term of up to five years) and typically terminate 90 days following the termination of the optionee's employment or engagement, except in the case of retirement or death. The vesting period for share purchase options is at the discretion of the Board of Directors at the time the options are granted.

The following summarizes the changes in the Company's share purchase options for the years ended July 31, 2013 and 2012:

Continuity of share options Number of options

outstanding Weighted average

exercise price

Share purchase options outstanding at July 31, 2012 1,767,600 $0.45

Forfeited during the year (61,800) $0.45


Share purchase options exercisable at July 31, 2013 1,705,800 $0.45


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Continuity of share options Number of options

outstanding Weighted average

exercise price

Share purchase options outstanding at July 31, 2011 – –

Granted during the year 1,776,600 $0.45

Forfeited during the year (9,000) $0.45


Share purchase options exercisable at July 31, 2012 589,200 $0.45

The weighted average contractual remaining life of the share purchase options outstanding at July 31, 2013 was 2.5 years (2012 – 4.0 years).

Options were priced based on the Black-Scholes option pricing model using the following weighted average assumptions to estimate the fair value of options granted: grant date share price of $0.45; risk-free interest rate of 1.2%; expected volatility of 119%; expected life of 4.0 years; expected dividend yield of nil; and expected forfeiture rate of nil.

The estimated weighted average fair value of options granted during the year ended July 31, 2013 was $NIL as no options were granted in the year (2012 – $0.34 per option). The Company recognized share-based payment expense of $210,872 in the year ended July 31, 2013 (2012 – $381,139).

Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable measure of the fair value of the Company's share purchase options.


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8. AMOUNTS PAYABLE AND OTHER LIABILITIES

Year ended July 31

2013 2012

Amounts payable $ 125,268 $ 544,156

Accrued liabilities 10,869 63,233

Total $ 136,137 $ 607,389

9. CONVERTIBLE DEBENTURE

Year ended July 31

2013 2012

Opening Balance $ – $ –

Convertible debenture issued 650,000 –

Portion of payment made pursuant to amendment by Amarc (note 6(a)) (20,000) –

Payment made pursuant to amendment by the Company (30,000) –

Total $ 600,000 $ –

Pursuant to the Galaxie Sale Agreement, the Company issued an unsecured $650,000 convertible debenture to Bearclaw as part of the purchase price. As part of the Letter Agreement, Amarc assumed $260,000 of this debt (note 6(a)).

In July 2013, Quartz Mountain and the holder of the Debenture entered into an agreement to amend the Debenture, whereby among other things, the Joint Arrangement made a $50,000 payment toward the Debenture reducing the outstanding balance to $600,000, the interest rate was increased to 10% per annum from 8% per annum, and the maturity date was extended to October 31, 2014 from October 31, 2013.

Interest payments for the Debenture are payable quarterly in arrears and the Debenture is convertible into the Company's common shares at an exercise price of $0.15 per share (previously $0.40 per share) on or before maturity of the Debenture on October 31, 2014. Any interest accrued, but unpaid, shall be converted at an exercise price of the higher of $0.15 per share (previously $0.40 per share) and the market price at the time of conversion. The interest rate implicit in the Debenture approximates the Company's borrowing rate. Accordingly, the net present value of the future cash flows associated with the Debenture approximates its carrying amount.


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10. FLOW-THROUGH SHARE PREMIUM LIABILITY

Year ended July 31

2013 2012

Balance at beginning of year $ 411,009 $ –

Recognized as liability upon issuance of flow-through shares 87,620 604,317

Derecognized upon eligible expenditures incurred (462,990) (193,308)

Balance at end of year $ 35,639 $ 411,009

Pursuant to the Private Placement of the flow-through shares (note 7(b)) and in accordance with the Income Tax Act (Canada), the Company is obligated to spend the Flow-through Funds on eligible Canadian Exploration Expenses ("CEE") and to renounce them to the investors. The renunciation of CEE to the investors was completed during the current year. At July 31, 2013, the balance of the flow-through share premium represents the prorated portion of the premium attributable to the Flow-through Funds that remained unspent on CEE at the end of the reporting period.

To July 31, 2013, out of total Flow-through Funds of $525,723, the Company had incurred approximately $312,000 in CEE.

The Company is subject to a tax, calculated monthly, on the portion of the flow-through funds raised in December 2012 and December 2011 remaining unspent after February 2013 and February 2012, respectively. The Company incurred a tax expense to date of $20,460 related to these flow-through proceeds.

11. RELATED PARTY BALANCES AND TRANSACTIONS

(a) Transactions with Key Management Personnel

Key management personnel are those persons that have the authority and responsibility for planning, directing and controlling the activities of the Company, directly and indirectly, and by definition include the directors of the Company.

During the years ended July 31, 2013 and 2012, the Company compensated key management personnel as follows:

Year ended July 31

2013 2012

Short-term employee benefits, including salaries and directors fees $ 420,943 $ 237,563

Equity-settled share-based payments 84,589 150,914

Total $ 505,532 $ 388,477


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(b) Entities with Significant Influence over the Company

The Company's management believes that certain entities have the power to participate in the financial or operating policies of the Company. Several directors and other key management personnel of those entities, who are close business associates, are also key management personnel of the Company. Pursuant to management agreements between the Company and these entities which have significant influence over the Company, the Company receives geological, engineering, corporate development, administrative, management and shareholder communication services from such entities.

Hunter Dickinson Services Inc.

Hunter Dickinson Services Inc. ("HDSI") is a private company which has certain directors and officers in common with the Company. HDSI provides geological, corporate development, administrative and management services to, and incurs third party costs on behalf of the Company pursuant to an agreement dated July 2, 2010, and is based on annually set rates.

Finsbury Exploration Ltd.

Finsbury is a private company which has certain directors in common with the Company.

In July 2012, the Company entered into an earn-in agreement (the "Galaxie Earn-in Agreement") with Finsbury, a non-arm's length party whereby it obtained an option to earn up to a 50% interest in the Galaxie Project by spending up to $1,500,000 in exploration expenditures. This agreement was terminated and in August 2012, the Company acquired the Galaxie Project outright (note 6(a)).

The transactions and balances with Finsbury presented herein relate to the Galaxie Earn-in Agreement.

Transactions with these related parties were as follows:

Year ended July 31

2013 2012

HDSI: Services received based on management services agreement $ 2,462,779 $ 1,135,345

HDSI: Reimbursement of third party expenses paid 122,318 120,444

Finsbury: Reimbursement of third party expenses paid – 25,278

Outstanding balances were as follows:

July 31, 2013 July 31, 2012

Balance payable to HDSI (i) $ 2,421,220 $ 786,425

Balance payable to Finsbury – 27,430

Total $ 2,421,220 $ 813,855

(i) The Company has received a confirmation from HDSI that HDSI will continue to provide services to the Company and will not demand repayment of amounts outstanding, prior to November 1, 2014.


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12. EMPLOYEES BENEFIT EXPENSES

The amount of employees' salaries and benefits included in various expenses are as follows:

Year ended July 31

2013 2012

Exploration and evaluation expenses $ 1,332,985 $ 544,802

General and administration expenses 1,071,064 697,025

Equity-settled share-based payment 210,872 381,139

Total $ 2,614,921 $ 1,622,966

13. OPERATING SEGMENTS

The Company operates in a single reportable operating segment – the acquisition, exploration and evaluation of mineral property interests. The Company is currently focused on the acquisition and exploration of mineral property interests in Canada.

14. TAXATION

(a) Provision for current tax

No provision has been made for current income taxes, as the Company has no taxable income.

(b) Provision for deferred tax

As future taxable profits of the Company are uncertain, no deferred tax asset has been recognized. As at July 31, 2013, the Company had unused non-capital loss carry forwards of approximately $4,489,000 (2012 – $2,901,000) in Canada and $21,000 (2012 – $37,000) in the United States.

The Company had approximately $4,519,000 (2012 – $4,550,000) of resource tax pools available, which may be used to shelter certain resource income.


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Reconciliation of effective tax rate:

Year ended July 31

2013 2012

Loss for the period $ (3,458,827) $ (3,587,805)

Income tax expense – –

Loss excluding income tax $ (3,458,827) $ (3,587,805)

Income tax recovery using the Company's domestic tax rate $ (874,000) $ (919,000)

Effect of tax rates in foreign jurisdictions – –

Non-deductible expenses and other 693,000 310,000

Change in deferred tax rates (77,000) –

Differences in statutory tax rates (9,000) 16,000

Differences due to foreign exchange – (1,000)

Changes in unrecognized temporary differences 267,000 594,000

$ – $ –

The Company's domestic tax rate during the year ended July 31, 2013 was 25.3% (2012 – 25.6%) and the effective tax rate was NIL (2012 – NIL).

As at July 31, 2013, the Company had the following balances in respect of which no deferred tax asset had been recognized:

Expiry: Tax losses Resource

pools Equipment

and other

Within one year $ 121,000 $ – $ –

One to five years 139,000 – 115,000

After five years 4,250,000 – 80,000

No expiry date – 3,497,000 114,000

$ 4,510,000 $ 3,497,000 $ 309,000

15. FINANCIAL 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 investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:

(a) Credit Risk

Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company's credit risk is primarily attributable to its


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liquid financial assets including cash and cash equivalents and amounts receivable. The Company limits its exposure to credit risk on liquid financial assets by only investing its cash and cash equivalents with high-credit quality financial institutions in business and savings accounts.

The carrying value of the Company's cash and cash equivalents and amounts receivable represent the maximum exposure to credit risk.

Carrying Amount

Financial Assets July 31, 2013 July 31, 2012

Cash and cash equivalents (note 4(a)) $ 706,393 $ 2,450,451

Amounts receivable (current and non-current) (note 5) 577,679 280,777

Restricted cash (note 4(b)) 158,387 78,000

Total $ 1,442,459 $ 2,809,228

(b) Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations when they become due. The Company ensures that there is 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 following obligations existed at July 31, 2013:

Payments due by period

Total Less than 1

year 1-5 years After 5 years

Amounts payable and other liabilities (note 8) $ 136,137 $ 136,137 $ – $ –

Convertible debentures (note 9) 600,000 – 600,000 –

Due to related parties (note 11) 2,421,220 2,421,220 – –

Total $ 3,157,357 $ 2,557,357 $ 600,000 $ –

The following obligations existed at July 31, 2012:

Payments due by period

Total Less than 1

year 1-5 years After 5 years

Amounts payable and other liabilities (note 8) $ 607,389 $ 607,389 $ – $ –

Due to related parties (note 11) 813,855 813,855 – –

Total $ 1,421,244 $ 1,421,244 $ – $ –


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(c) Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

Interest rate risk

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

Assuming that all variables remain constant, a 10 basis points change representing a 0.1% increase or decrease in interest rates would have resulted in a decrease or increase in the loss for the year ended July 31, 2013 of approximately $1,100 (2012 – $1,300).

Foreign exchange risk

The Company incurs substantially all of its expenditures in Canada and substantially all of its cash and cash equivalents held are denominated in Canadian dollars. Consequently the Company is not subject to material foreign exchange risk.

Price risk

The Company is not subject to any price risk.

(d) 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 liquidity available to fund ongoing expenditures and suitable 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. In order to maintain or adjust the capital structure, the Company may issue equity, sell assets, or return capital to shareholders as well as issue or repay debt.

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 and 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, 2013.

The Company is not subject to any externally imposed equity requirements.


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(e) Fair Value

The fair value of the Company's financial assets and liabilities approximate the carrying value. Due to their short-term nature, cash and cash equivalents are carried at a level 1 fair value.

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.

There were no transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments during the year ended July 31, 2013.

quartz mountain resources ltd. · quartz mountain resources ltd. for the year ended july 31, 2013...

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