================================================================================

                    U. S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB/A

                                 AMENDMENT NO. 3

[X]            ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                  For the fiscal year ended December 31, 2005

[_]         TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
 For the transition period from _____________________ to _____________________

                        Commission file number 000-32325

                               GMX RESOURCES INC.
                 (Name of small business issuer in its charter)

           OKLAHOMA                                   73-1534474
 (State or other jurisdiction             (I.R.S. Employer Identification No.)
        of incorporation)

          9400 North Broadway, Suite 600, Oklahoma City, Oklahoma 73114
                    (Address of principal executive offices)

(Issuer's Telephone Number) (405) 600-0711

Securities registered under Section 12(b) of the Exchange Act:     NONE

Securities registered under Section 12(g) of the Exchange Act:

                         COMMON STOCK, $0.001 PAR VALUE
                                (Title of Class)

Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act [_].

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [X] Yes [_] No

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [_]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 126 of the Exchange Act). [_] Yes [X] No

The issuer's revenue for the year ended December 31, 2005 was $19,192,704.

The aggregate market value of the voting and non-voting common equity held by
non-affiliates on March 23, 2006 was $390.8 million. This amount was computed
using closing price of the issuer's common stock on March 23, 2006 on the NASDAQ
National Market.

As of March 28, 2006, the issuer had outstanding a total of 11,192,467 shares of
its $0.001 par value Common Stock.

Documents incorporated by reference - NONE

Transitional Small Business Disclosure Format (Check one):  Yes  [_]   No  [X]
================================================================================
<PAGE>

                             INTRODUCTORY STATEMENT

This Amendment No. 3 to Form 10-KSB is filed solely for purposes of correcting
the following typographical or clerical errors

          1.   The balance sheet in Item 8. Financial Statements is amended to
               change heading "Preferred Stock, par value $0.01 per share,
               500,000 shares authorized" to "Preferred Stock, par value $0.001
               per share, 10,000,000 shares authorized, 25,000 shares designated
               as Series A Junior Participating Preferred Stock, none issued and
               outstanding".

          2.   The third full paragraph on page 16 under Item 2. Properties
               relating to our proved reserves in East Texas is amended to
               change all references to Bcfe to MMcfe.

          3.   Exhibit 10.4(b) was erroneously not included in the originally
               filed Form 10-KSB on March 31, 2006.

Pursuant to the rules of the Securities and Exchange Commission, the full text
of each Item as amended is included in this report, even though there are no
other amendments to such Items.














                                       i
<PAGE>

                               GMX RESOURCES INC.
                          FORM 10-KSB/A AMENDMENT NO. 3
                                TABLE OF CONTENTS

                                                                            Page

PART I.........................................................................1

Item 2. PROPERTIES.............................................................1

            General............................................................1
            East Texas.........................................................1
            Northwestern Louisiana.............................................3
            Southeast New Mexico...............................................4
            Reserves...........................................................4
            Costs Incurred.....................................................6
            Productive Well Summary............................................7

PART II........................................................................8

Item 8.     FINANCIAL STATEMENTS...............................................8


SIGNATURES.....................................................................9

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS...................................F-1






















                                       ii
<PAGE>

                                     PART I

ITEM 2.     PROPERTIES

GENERAL

     As of December 31, 2005, we owned properties in the following productive
fields and basins in the United States:

          o    East Texas, North Carthage Field and NE Louisiana, Waskom Field;

          o    The Tatum Basin Crossroads in Southeast New Mexico.

     The following table sets forth certain information regarding our activities
in each of these areas as of December 31, 2005.

<TABLE><CAPTION>
                                                              EAST TEXAS       SOUTHEAST
                                                                  AND             NEW
                                                               LOUISIANA         MEXICO         TOTAL
                                                               ---------         ------         -----
          PROPERTY STATISTICS:
          --------------------
<S>                                                              <C>              <C>          <C>
          Proved reserves (MMcfe)                                158,957          3,046        162,003
          Percent of total proved reserves                            98%             2%           100%
          Gross producing wells                                       90              7             97
          Net producing wells                                       54.7            5.4           60.1
          Gross acreage                                           29,023          1,920         30,943
          Net acreage                                             15,706          1,458         17,164
          Proved developed reserves (MMcfe)                       45,023          1,100         46,123
          Proved undeveloped reserves (MMcfe)                    113,934          1,946        115,880
          Estimated total future development costs ($000s)       189,521          1,179        190,700
          Estimated 2006 development costs ($000s)                90,000          2,000         92,000
          Proved undeveloped locations                               184              3            187

          YEAR ENDED DECEMBER 31, 2005
          RESULTS:
          Production (net MMcfe)                                   2,108            112          2,220
          Average net daily production (Mcfe)                      5,775            307          6,082
</TABLE>

     Additional information related to our oil and gas activities is included in
Notes J and K to the financial statements beginning on Page F-1.

EAST TEXAS

     The East Texas properties are located in Harrison and Panola Counties,
Texas. These properties contain approximately 28,423 gross (15,337 net) acres
with rights covering the Travis Peak, Pettit, Glen Rose and Cotton Valley
formations. Our East Texas properties have 158.6 Bcfe of proved reserves or 98%
of our total proved reserves at December 31, 2005, of which 113.9 Bcfe is
classified as proved undeveloped.

                                       1
<PAGE>

     We have interests in 85 gross (52.0 net) producing wells in East Texas, of
which we operate 43. Average daily production net to our interest for 2005 was
4,731 Mcf of gas and 98 Bbls of oil. Production is primarily from the Betheny,
Blocker and Waskom Fields. The producing lives of these fields are generally 12
to 70 years. We have identified productive zones in the existing wells that are
currently behind pipe and thus are not currently producing. These zones can be
brought into production as existing reserves are depleted. The Blocker and
Betheny areas include 39 gross (36.6 net) wells in Harrison County which produce
gas that is gathered, compressed and sold by Endeavor. Gas sold from the Blocker
area has a high MMBtu content which results in a net price above NYMEX average
daily Henry Hub natural gas price. Oil is sold separately at a slight premium to
the average NYMEX Sweet Crude Cushing price, inclusive of deductions. Most of
the planned development will be added to existing gathering systems under
comparable contracts.

     The undeveloped acreage in these areas lies on Sabine Uplift just north of
the Carthage Field. The area has 29 producing reservoirs at depths from 3,000 to
10,000 feet. The reservoir trends are similar to river channels and beach
barrier bars and are generally substantial in length and sometimes width. These
features occur in more than one producing horizon and we give first priority to
drilling locations where a single well can drill through two or more producing
zones. This increases the reserves recoverable through a single wellbore. We
believe the natural gas development opportunities on this property base are
substantial and abundant. Our proved developed non-producing and proved
undeveloped reserves are significant in this region consisting of 48.8 Bcfe,
frequently located at the intersection of multiple crossing reservoir trends.
Each well generally penetrates multiple potentially productive formations,
including the Pettit, Travis Peak and Cotton Valley.

     On December 29, 2003, we executed a definitive participation agreement with
PVOG for the joint development of our Cotton Valley, Travis Peak and Pettit
prospects located in East Texas. The agreement was amended on several occasions
in 2004, 2005 and 2006. The participation agreement expires in December 2007.
This agreement, as amended, designates agreed geographic areas which surround
and encompass distinct portions of our acreage positions in East Texas defined
as "Phases." PVOG began drilling in February 2004 in Phase I (the "JV 30%
Area"), which includes approximately 9,908 gross (2,833 net) acres comprising a
portion of our proved undeveloped acreage. GMX has a 20% carried interest in the
first wells drilled in the JV 30% Area and a right to participate for 30% of
additional wells. PVOG has drilled and completed 36 wells in the JV 30% Area.
Phase II (the "JV 50% Area") includes approximately 8,052 gross (3,864 net)
acres. We have a 20% carried interest in the first two wells and a right to
participate for up to 50% of additional drilling in the JV 50% Area. During 2005
PVOG drilled and completed 3 wells in this area. At inception, we received
approximately $950,000 in acreage and drilling location cost reimbursement which
was applied to reduce current liabilities. The PVOG agreement also designates
areas of mutual interest ("AMIs") in which GMX and PVOG agree that they will
have rights to jointly acquire acreage until December 2007. The JV 30% Area AMI
consist of 20,500 acres in which GMX and PVOG have agreed to share future
acreage acquisitions on a 70% PVOG/30% GMX basis. The JV 50% Area AMI consists
of 22,400 acres and a 50% PVOG/50% GMX sharing ratio. The Phase III (the "GMXR
100% Area") AMI consists of 15,360 acres and is an area surrounding GMX's
existing wells. GMX has granted to PVOG a right of first refusal on any sale of
acreage in the GMXR 100% Area and PVOG is restricted from acquiring acreage in
the GMXR 100% Area until one year after termination of the participation
agreement, unless GMX no longer owns

                                       2
<PAGE>

acreage in the GMXR 100% Area. In 2004, we jointly acquired 2,665 gross acres in
the JV 30% Area and 670 acres in the JV 50% Area. In 2005 we jointly acquired
2,091 gross acres (660 net) in the JV 30% Area and 1,121 gross acres (539 net)
in the JV 50% Area. During 2005 we acquired 2,481 gross acres (1,850 net) in the
GMXR 100% Area. Also, during 2005 we drilled and completed 8 wells in the GMXR
100% Area.

     The participation agreement originally limited PVOG to the use of one rig.
During a portion of 2004, PVOG used two rigs under an amendment to our agreement
whereby PVOG agreed to purchase a dollar denominated production payment from us
to finance our share of costs of drilling using the second rig. This arrangement
was terminated in November 2004 and since that date, only one rig was used
throughout the remainder of 2004 and early 2005. We received $1,929,029 in
funding from PVOG under this arrangement, which is repayable from 75% of our
share of production proceeds from the wells financed. In March 2005, we entered
into a further amendment to the joint participation agreement permitting PVOG to
use two rigs, when one can be located, which permits us to share in the use of
the second rig for our own account in drilling in Phase III, on an alternating
basis with PVOG. We and PVOG each have the right to use the second rig for up to
three consecutive wells. We will pay for the rig when we use it on the same
terms as PVOG. Effective January 1, 2006, we agreed that PVOG could use two
additional rigs. Either party may terminate the multiple rig provisions on 60
days notice subject to the terms of any drilling contract for the second rig.

     Our success rate has been 100% on wells drilled and completed in 2004 and
2005. There is a potential for up to 619 gross (374 net) locations of Cotton
Valley wells in our East Texas acreage assuming an ultimate well density of two
wells in each 80-acre tract.

     At December 31, 2005, Sproule Associates, Inc., our independent reserve
engineering firm, assigned a total of 25,925 MMcfe of proved producing reserves
to the completed East Texas wells, 18,740 MMcfe to our proved developed
non-producing wells, and 113,934 MMcfe of proved undeveloped reserves to our 184
proved undeveloped locations in East Texas.

     The pace of future development of this property will depend on the pace of
PVOG's activity under our joint participation agreement described above,
availability of capital, future drilling results, the general economic
conditions of the energy industry and on the price we receive for the natural
gas and crude oil produced. Depending on rig availability and funding, in 2006,
we expect PVOG to drill 20-28 new Cotton Valley wells in the JV 30% Area and
10-17 Cotton Valley wells in the JV 50% Area and we expect to drill up to 30
Cotton Valley wells in the GMXR 100% Area. We also plan to recomplete 4-6 wells
in the GMXR 100% Area. We will fund our share of this drilling at the low end of
these ranges from internal cash flow and borrowings under our bank credit
facility. If drilling is proposed at the higher ranges, we may need outside
sources of capital to fund our share, which we expect to fund through additional
borrowings rather than sales of additional equity. In 2005 and through February
2006 when our Class A warrants expired, we received $14 million from the
exercise of warrants.

NORTHWESTERN LOUISIANA

     The Louisiana properties are located in Clairborne, Caddo, Catahoula and
Webster parishes. These properties contain approximately 600 gross (369 net)
acres in the Waskom Field with production from the Cotton Valley, Hosston and
Rodessa formations. We have five gross

                                       3
<PAGE>

(2.6 net) producing wells, three of which we operate. Production is
predominately oil. Louisiana proved reserves are 0.4 Bcfe and represent
approximately 1% of proved reserves as of December 31, 2005. Average daily
production net to our interest for 2005 was 2 Bbls of oil and 22 Mcf of gas.

SOUTHEAST NEW MEXICO

     Our Southeast New Mexico properties are located in Lea and Roosevelt
counties and consist of approximately 1,920 gross (1,458 net) acres. The acreage
lies on the northwestern edge of the Midland Basin, defined as the Tatum Basin.
Existing production is from three zones--the Bough C, Abo and San Andres--at
depths ranging from 9,500 to 10,000 feet. Proved reserves in Southeast New
Mexico are 3.0 Bcfe and represent 2% of our total proved reserves as of December
31, 2005. Average daily production net to our interests for 2005 from our 7
gross (5.4 net) producing wells in this area was 124 Mcf of gas and 25 Bbls of
oil.

     Third party drilling activity in the vicinity of our properties also
suggests that deeper exploration may be warranted to the Atoka, Morrow, and
Devonian formations. In 2004, we entered into a farmout with Yates Petroleum
Corporation which completed 3D seismic evaluations of these formations. GMX
farmed out its 320-acre leasehold interest to Yates Petroleum Corporation
retaining a 25% working interest before payout with an overriding royalty
convertible to 30% working interest after payout. This 320-acre leasehold is
part of a 960.17-acre AMI wherein three Morrow wells have been proposed under
our operating agreement with Yates.

     GMX's interests in these three wells named the Gosden BGI State #1, Twitty
BFH State #1 and Huskey "Big" State #1 are as follows:

            Before Payout Working Interest                    7.6694%
            Before Payout Net Revenue:                        6.710725%
            Convertible Overriding Royalty Interest:          2.229072%

            After Payout Working Interest                     14.5719%
            After Payout Net Revenue                          12.750413%


     The Gosden #1 was drilled and completed in the second quarter 2005 and
reached payout status 31 days after first sales. GMX elected to covert its
Overriding Royalty Interest in the Gosden #1 increasing its net revenue from
8.935 to 12.75%. The Twitty #1 and Huskey #1 are scheduled for drilling in the
first quarter of 2006. GMX has a carried interests in these two wells identical
to the Gosden #1.

     We also plan to drill approximately 14 wells in the San Andres formation at
5,500' approximate depth in 2006.

RESERVES

     As of December 31, 2005, Sproule Associates Inc. estimated our proved
reserves to be 162 Bcfe. An estimated 46 Bcfe is expected to be produced from
existing wells and another 116 Bcfe or 72% of the proved reserves, is classified
as proved undeveloped. All of our proved

                                       4
<PAGE>

undeveloped reserves are on locations that are adjacent to wells productive in
the same formations. As of December 31, 2005, we had interests in 97 gross
producing wells, 43 of which we operate.

     The following table shows the estimated net quantities of our proved
reserves as of the dates indicated and the Estimated Future Net Revenues and
Present Values attributable to total proved reserves at such dates.

<TABLE><CAPTION>
                                                                          YEARS ENDED DECEMBER 31,
                                                                     2003           2004           2005
                                                                  ----------     ----------     ----------
<S>                                                                   <C>            <C>            <C>
PROVED DEVELOPED:
Gas (MMcf)                                                            18,277         18,980         41,503
Oil (MBbls)                                                              568            584            770
                                                Total (MMcfe)         21,685         22,484         46,123
PROVED UNDEVELOPED:
Gas (MMcf)                                                            26,752         37,908        108,673
Oil (MBbls)                                                              755            653          1,201
                                                Total (MMcfe)         31,282         41,826        115,880
TOTAL PROVED:
Gas (MMcf)                                                            45,029         56,888        150,176
Oil (MBbls)                                                            1,323          1,237          1,971
                                                Total (MMcfe)         52,967         64,309        162,003

ESTIMATED FUTURE NET REVENUES (1)($000S)                          $  178,348     $  214,278     $1,648,402

PRESENT VALUE(1)($000S)                                           $   71,192     $   83,237     $  409,624

STANDARDIZED MEASURE (1) ($000S)                                  $   47,975     $   64,231     $  302,396
</TABLE>
-------------------------

(1)     The prices used in calculating Estimated Future Net Revenues and the
        Present Value are determined using prices as of period end. Estimated
        Future Net Revenues and the Present Value give no effect to federal or
        state income taxes attributable to estimated future net revenues. See
        "Note K - Supplemental Information on Oil and Gas Operations" for
        information about the standardized measure of discounted future net cash
        flows. We believe that the Estimated Future Net Revenue and Present
        Value are useful measures in addition to standardized measure as it
        assists in both the determination of future cash flows of the current
        reserves as well as in making relative value comparisons among peer
        companies. The standardized measure is dependent on the unique tax
        situation of each individual company, while the pre-tax Present Value is
        based on prices and discount factors which are consistent from company
        to company. We also understand that securities analysts use this measure
        in similar ways.

     The increase in proved reserves in 2005 is primarily attributable to
extensions and discoveries and revisions of prior estimates resulting from our
East Texas drilling results.

     Approximately 72% of our proved reserves are undeveloped. By their nature,
estimates of undeveloped reserves are less certain. In addition, the quantity
and value of our proved undeveloped reserves is dependent upon our ability to
fund the associated development costs which were a total of an estimated $190
million as of December 31, 2005, of which $92 million

                                       5
<PAGE>

is scheduled to be expended in 2006. These estimated costs may not be accurate,
development may not occur as scheduled and results may not be as estimated.

     The Estimated Future Net Revenues and Present Value are highly sensitive to
commodity price changes and commodity prices have recently been highly volatile.
The prices used to calculate Estimated Future Net Revenues and Present Value of
our proved reserves as of December 31, 2005 were $61.04 per barrel for oil and
$11.225 per Mmbtu for gas, adjusted for quality, contractual agreements,
regional price variations and transportation and marketing fees. These period
end prices are not necessarily the prices we expect to receive for our
production but are required to be used for disclosure purposes by the SEC. We
estimate that if all other factors (including the estimated quantities of
economically recoverable reserves) were held constant, a $1.00 per Bbl change in
oil prices and a $.10 per Mcf change in gas prices from those used in
calculating the Present Value would change such Present Value by $807,000, and
$5,723,000, respectively, as of December 31, 2005.

     Sproule Associates, Inc., our independent reserve engineers, prepared the
estimates of proved reserves as of December 31, 2003, 2004 and 2005.

     No estimates of our proved reserves comparable to those included in this
report have been included in reports to any federal agency other than the
Securities and Exchange Commission.

COSTS INCURRED

     The following table shows certain information regarding the costs incurred
by us in our acquisition and development activities during the periods
indicated. We have not incurred any exploration costs.

<TABLE><CAPTION>
                                                YEAR ENDED DECEMBER 31,
                                     ----------------------------------------------
                                         2003             2004             2005
                                     ------------     ------------     ------------
<S>                                  <C>              <C>              <C>
PROPERTY ACQUISITION COSTS:
                        Proved       $     57,565     $       --       $       --
                        Unproved            5,212          851,617        1,230,409
DEVELOPMENT COSTS                         173,840        7,681,750       24,789,281
                                     ------------     ------------     ------------
                        Total        $    236,617     $  8,533,367     $ 26,019,690
                                     ============     ============     ============
</TABLE>

DRILLING RESULTS

     We drilled or participated in the drilling of wells as set out in the table
below for the periods indicated. The table was completed based upon the date
drilling commenced. We did not acquire any wells or conduct any exploratory
drilling during these periods. You should not consider the results of prior
drilling activities as necessarily indicative of future performance, nor should
you assume that there is necessarily any correlation between the number of
productive wells drilled and the oil and gas reserves generated by those wells.

                                       6
<PAGE>

<TABLE><CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                            ---------------------------------------------------------------------
                                  2003                      2004                      2005
                            -----------------         -----------------         -----------------
<S>                         <C>          <C>          <C>          <C>          <C>          <C>
DEVELOPMENT WELLS:         Gross         Net         Gross         Net         Gross         Net

Gas                          --           --           15            4           31           16
Oil                          --           --           --           --           --           --
Dry                          --           --           --           --           --           --
                            ----         ----         ----         ----         ----         ----
Total                        --           --           15            4           31           16
                            ====         ====         ====         ====         ====         ====
</TABLE>

ACREAGE

     The following table shows our developed and undeveloped oil and gas lease
and mineral acreage as of December 31, 2005. Excluded is acreage in which our
interest is limited to royalty, overriding royalty and other similar interests.

<TABLE><CAPTION>
                                        DEVELOPED                 UNDEVELOPED
                                  ---------------------     ---------------------
LOCATION                            GROSS        NET          GROSS        NET
--------                          --------     --------     --------     --------
<S>                                 <C>          <C>           <C>          <C>
East Texas and Louisiana            19,915       11,820        9,108        3,887
Southeast New Mexico                 1,920        1,458         --           --
                                  --------     --------     --------     --------
                        Total       21,835       13,278        9,108        3,887
                                  ========     ========     ========     ========
</TABLE>

     Title to oil and gas acreage is often complex. Landowners may have
subdivided interests in the mineral estate. Oil and gas companies frequently
subdivide the leasehold estate to spread drilling risk and often create
overriding royalties. When we purchased the properties, the purchase included
title opinions prepared by counsel in the several states analyzing mineral
ownership in each well drilled. Further, for each producing well there is a
division order signed by the current recipients of payments from production
stipulating their assent to the fraction of the revenues they receive. We obtain
similar title opinions with respect to each new well drilled. While these
practices, which are common in the industry, do not assure that there will be no
claims against title to the wells or the associated revenues, we believe that we
are within normal and prudent industry practices. Because many of the properties
in our current portfolio were purchased out of bankruptcy in 1998, we have the
advantage that any known or unknown liens against the properties were cleared in
the bankruptcy.

PRODUCTIVE WELL SUMMARY

     The following table shows our ownership in productive wells as of December
31, 2005 Gross oil and gas wells include one well with multiple completions.
Wells with multiple completions are counted only once for purposes of the
following table.

                                              PRODUCTIVE WELLS
                                            ---------------------
               TYPE OF WELL                  GROSS         NET
               ------------                 --------     --------

               Gas                                77         44.7
               Oil                                20         15.4
                                            --------     --------
                                  Total           97         60.1
                                            ========     ========

                                       7
<PAGE>

                                     PART II

ITEM 8.                 FINANCIAL STATEMENTS

     Our consolidated financial statements are presented beginning on page F-1
found at the end of this report.




























                                       8
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                       GMX RESOURCES INC.

Dated:  August 1, 2006                 By: /s/ Ken L. Kenworthy, Jr.
                                           -------------------------------------
                                           Ken L. Kenworthy, Jr., President

     Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE><CAPTION>
        SIGNATURES                                    TITLE                                  DATE
-------------------------------    -------------------------------------------------    --------------
<S>                                <C>                                                  <C>
/s/ Ken L. Kenworthy, Jr.          President and Director                               August 1, 2006
-------------------------------    (Principal Executive Officer)
Ken L. Kenworthy, Jr.

/s/ Ken L. Kenworthy, Jr.          Executive Vice President, Chief Financial Officer    August 1, 2006
-------------------------------    and Director (Principal Financial and Accounting
Ken L. Kenworthy, Sr.              Officer)

/s/ T. J. Boismier                 Director                                             August 1, 2006
-------------------------------
T. J. Boismier

/s/ Steven Craig                   Director                                             August 1, 2006
-------------------------------
Steven Craig

/s/ Jon W. McHugh                  Director                                             August 1, 2006
-------------------------------
Jon W. McHugh
</TABLE>









                                       9
<PAGE>




                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Registered Public Accounting Firm...................   F-2

Consolidated Balance Sheets, December 31, 2004 and 2005...................   F-3

Consolidated Statements of Operations, Years Ended
   December 31, 2004 and 2005.............................................   F-4

Consolidated Statements of Changes in Shareholders' Equity,
   Years Ended December 31, 2004 and 2005.................................   F-5

Consolidated Statements of Cash Flows, Years Ended
   December 31, 2004 and 2005.............................................   F-6

Notes to Consolidated Financial Statements................................   F-7































                                       F-1
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Shareholders
GMX Resources Inc.

We have audited the accompanying consolidated balance sheets of GMX Resources
Inc. and subsidiaries as of December 31, 2004 and 2005 and the related
consolidated statements of operations, changes in shareholders' equity, and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of GMX Resources Inc.
and subsidiaries as of December 31, 2004 and 2005 and the results of their
operations and their cash flows for the years then ended, in conformity with
U.S. generally accepted accounting principles.

As discussed in Note J to the financial statements, an error in the line item
description of preferred stock in the shareholders equity section of the
consolidated balance sheets as of December 31, 2004 and 2005, was discovered by
management of the Company during the current year. Accordingly, the 2005
financial statements have been restated to correct the error.



                                                     Smith, Carney & Co., p.c.



Oklahoma City, Oklahoma
February 16, 2006 (Except
for Note J, which is dated
August 1, 2006)




                                       F-2
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE><CAPTION>
                                                                                           December 31,
                                                                                   ----------------------------
                                                                                       2004            2005
                                                                                   ------------    ------------
<S>                                                                                <C>             <C>

                                                ASSETS
CURRENT ASSETS:
       Cash and cash equivalents                                                   $    862,546       2,392,497
       Accounts receivable--interest owners                                              96,248          74,971
       Accounts receivable--oil and gas revenues                                      1,501,073       4,188,451
       Inventories                                                                      204,442         247,364
       Prepaid expenses                                                                 108,447          10,028
                                                                                   ------------    ------------
                 Total current assets                                                 2,772,756       6,913,311
                                                                                   ------------    ------------

OIL AND GAS PROPERTIES, AT COST, BASED ON THE FULL COST METHOD OF ACCOUNTING         42,452,970      68,920,264
       Less accumulated depreciation, depletion, and amortization                    (6,496,210)     (9,992,867)
                                                                                   ------------    ------------
                                                                                     35,956,760      58,927,397
                                                                                   ------------    ------------

OTHER PROPERTY AND EQUIPMENT                                                          3,515,422      17,044,734
       Less accumulated depreciation                                                 (1,308,358)     (1,793,781)
                                                                                   ------------    ------------
                                                                                      2,207,064      15,250,953
                                                                                   ------------    ------------

OTHER ASSETS                                                                             54,883          11,610
                                                                                   ------------    ------------

                         TOTAL ASSETS                                              $ 40,991,463      81,103,271
                                                                                   ============    ============


                                 LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
       Accounts payable                                                            $  2,321,517       7,809,387
       Accrued expenses                                                                 134,718         419,130
       Accrued interest                                                                      --          25,430
       Revenue distributions payable                                                    274,862         317,232
       Short-term loan                                                                       --       5,100,000
       Current portion of long-term debt                                                433,933         345,967
                                                                                   ------------    ------------
                         Total current liabilities                                    3,165,030      14,017,146

LONG-TERM DEBT, LESS CURRENT PORTION                                                  3,328,361       1,410,035

OTHER LIABILITIES                                                                     2,091,216       4,450,994

SHAREHOLDERS' EQUITY:
       Preferred stock, par value $.001 per share, 10,000,000 shares authorized;
       25,000 shares designated as Series A Junior Participating Preferred
       Stock, none issues and outstanding Common stock, par value $.001 per
       share-authorized 50,000,000 shares issued and outstanding 8,053,540
       shares in 2004 and 9,975,315 shares in 2005                                        8,054           9,975
       Additional paid-in capital                                                    29,305,012      50,965,235
       Retained earnings                                                              3,093,790      10,249,886
                                                                                   ------------    ------------
                         Total shareholders' equity                                  32,406,856      61,225,096
                                                                                   ------------    ------------

                         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                $ 40,991,463      81,103,271
                                                                                   ============    ============
</TABLE>
See accompanying notes to consolidated financial statements.


                                       F-3
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE><CAPTION>
                                                                                      Year Ended December 31,
                                                                                   ----------------------------
                                                                                       2004            2005
                                                                                   ------------    ------------
<S>                                                                                <C>             <C>
REVENUE:
       Oil and gas sales                                                           $  7,689,882    $ 19,026,050
       Interest income                                                                   14,498         161,434
       Other income                                                                     129,330           5,220
                                                                                   ------------    ------------
       Total revenue                                                                  7,833,710      19,192,704
                                                                                   ------------    ------------


EXPENSES:
       Lease operations                                                               1,261,109       2,070,286
       Production and severance taxes                                                   518,721       1,241,338
       Depreciation, depletion and amortization                                       2,043,485       3,982,079
       Interest                                                                         558,504         142,409
       General and administrative                                                     1,985,912       3,388,396
                                                                                   ------------    ------------
       Total expenses                                                                 6,367,731      10,824,508
                                                                                   ------------    ------------

       Income before income taxes                                                     1,465,979       8,368,196

INCOME TAXES                                                                             24,206       1,212,100
                                                                                   ------------    ------------

Net income                                                                         $  1,441,773    $  7,156,096
                                                                                   ============    ============


       EARNINGS PER SHARE - Basic                                                  $       0.19    $       0.81
                                                                                   ============    ============
       EARNINGS PER SHARE -Diluted                                                 $       0.19    $       0.79
                                                                                   ============    ============
       WEIGHTED AVERAGE COMMON SHARES-Basic                                           7,396,880       8,797,529
                                                                                   ============    ============
       WEIGHTED AVERAGE COMMON SHARES-Diluted                                         7,491,778       9,102,181
                                                                                   ============    ============
</TABLE>
See accompanying notes to consolidated financial statements.


                                       F-4
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 2004 AND 2005





<TABLE><CAPTION>
                                         COMMON STOCK                ADDITIONAL                            TOTAL
                                ------------------------------        PAID-IN           RETAINED        SHAREHOLDERS'
                                   SHARES            AMOUNT           CAPITAL           EARNINGS           EQUITY
                                ------------      ------------      ------------      ------------      ------------
<S>                             <C>               <C>               <C>               <C>               <C>
BALANCE AT DECEMBER 31, 2003       6,575,000      $      6,575      $ 20,959,973      $  1,652,017      $ 22,618,585
Options Exercised                     15,000                15            14,985                --            15,000
Redeemed & Cancelled Warrants             --                --          (118,712)               --          (118,712)
Warrants Granted                          --                --           257,250                --           257,250
Warrants Exercised                   163,540               164           177,398                --           177,562
Shares Issued                      1,300,000             1,300         8,014,118                --         8,015,418
Net income                                --                --                --         1,441,773         1,441,773
                                ------------      ------------      ------------      ------------      ------------
BALANCE AT DECEMBER 31, 2004       8,053,540      $      8,054      $ 29,305.012      $  3,093,790      $ 32,406,856
                                ------------      ------------      ------------      ------------      ------------
Options Exercised                    128,250               128           422,787                --           422,915
Redeemed & Cancelled Warrants       (144,180)             (144)         (774,134)               --          (774,278)
Warrants Granted                          --                --                --                --                --
Warrants Exercised                   337,705               337         1,666,898                --         1,667,235
Shares Issued                      1,600,000             1,600        20,344,672                --        20,346,272
Net Income                                --                --                --         7,156,096         7,156,096
                                ------------      ------------      ------------      ------------      ------------

BALANCE AT DECEMBER 31, 2005       9,975,315      $      9,975      $ 50,965,235      $ 10,249,886      $ 61,225,096
                                ============      ============      ============      ============      ============
</TABLE>

See accompanying notes to consolidated financial statements.







                                       F-5
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE><CAPTION>
                                                                                     Years Ended December 31,
                                                                                   ----------------------------
                                                                                       2004            2005
                                                                                   ------------    ------------
<S>                                                                                <C>             <C>
CASH FLOWS DUE TO OPERATING ACTIVITIES
       Net income                                                                  $  1,441,773    $  7,156,096
       Adjustments to reconcile net income
       to net cash provided by operating activities;
               Depreciation, depletion, and amortization                              2,043,485       3,982,080
               Amortization of loan fees                                                326,762         112,349
               Deferred income taxes                                                         --       1,212,100
               Decrease (increase) in:
                    Accounts receivable                                                (865,035)     (2,666,101)
                    Inventory and prepaid expenses                                     (431,908)        (56,852)
                    Other assets                                                             --          43,273
               Increase (decrease) in:
                    Accounts payable                                                  1,187,017       5,487,870
                    Accrued expenses and other liabilities                               40,128         309,842
                    Revenue distributions payable                                       (58,067)        742,446
                                                                                   ------------    ------------

                    Net cash provided by operating activities                         3,684,155      16,323,103
                                                                                   ------------    ------------

CASH FLOWS DUE TO INVESTING ACTIVITIES
       Additions to oil and gas properties                                           (8,533,367)    (26,019,690)
       Purchase of property and equipment                                              (334,577)    (13,529,312)
                                                                                   ------------    ------------
                    Net cash provided by (used in) investing activities              (8,867,944)    (39,549,002)
                                                                                   ------------    ------------

CASH FLOWS DUE TO FINANCING ACTIVITIES
       Advance on borrowings                                                          3,872,457      10,701,763
       Payments on debt                                                              (6,800,162)     (7,608,056)
       Proceeds from sale of stock                                                    8,346,518      21,662,143
                                                                                   ------------    ------------
                    Net cash provided by financing activities                         5,418,813      24,755,850
                                                                                   ------------    ------------

NET INCREASE IN CASH                                                                    225,024       1,529,951

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                        637,522         862,546
                                                                                   ------------    ------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                         $    862,546       2,392,497
                                                                                   ============    ============

CASH PAID FOR INTEREST                                                             $    261,445         116,979
                                                                                   ============    ============

CASH PAID FOR INCOME TAXES                                                         $     24,206              --
                                                                                   ============    ============
</TABLE>
See accompanying notes to consolidated financial statements.


                                       F-6
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of GMX Resources Inc. (the "Company or GMX") and its wholly owned
subsidiaries, Endeavor Pipeline, Inc. and Diamond Blue Drilling Co. Endeavor
Pipeline, Inc. owns and operates natural gas gathering facilities in East Texas.
Diamond Blue Drilling Co. owns drilling rigs and drills oil and gas wells
exclusively for GMX. All significant intercompany accounts and transactions have
been eliminated. Accounting policies used by the Company reflect industry
practices and conform to accounting principles generally accepted in the United
States of America. The more significant of such policies are briefly described
below.

ORGANIZATION: The Company was formed in January 1998. The Company is primarily
engaged in acquisition, exploration, and development of properties for the
production of crude oil and natural gas in Louisiana, New Mexico, and Texas.

CASH AND CASH EQUIVALENTS: GMX considers all highly liquid investments with
maturities of three months or less at the time of purchase to be cash
equivalents.

INVENTORIES: Inventories consist of lease and well equipment and crude oil on
hand. The Company uses lease and well equipment in its ongoing operations and it
is carried at the lower of cost or market. Treated and stored crude oil
inventory on hand at the end of the year is valued at the lower of cost or
market.

PROPERTY AND EQUIPMENT: The Company follows the full cost method of accounting
for its oil and gas properties. Accordingly, all costs incidental to the
acquisition, exploration and development of oil and gas properties, including
costs of undeveloped leasehold, dry holes and leasehold equipment are
capitalized. Net capitalized costs are limited to the estimated future net
revenues, discounted at 10% per annum, from proved oil, natural gas, and natural
gas liquid reserves. Capitalized costs are depleted by an equivalent
unit-of-production method, converting oil to gas at the ratio of one barrel of
oil to six thousand cubic feet of natural gas. No gain or loss is recognized
upon disposal of oil and gas properties unless such disposal significantly
alters the relationship between capitalized costs and proved reserves. Revenues
from PersonNameservices provided to working interest owners of properties in
which GMX also owns an interest, to the extent they exceed related costs
incurred, are accounted for as reductions of capitalized costs of oil and gas
properties.

Depreciation and amortization of other property and equipment, including
leasehold improvements, are provided using the straight-line method based on
estimated useful lives from five to 10 years.

Pipeline and gathering system assets and other long-lived assets are
periodically assessed to determine if circumstances indicate that the carrying
amount of an asset may not be recoverable in accordance with SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." This statement
requires (a) recognition of an impairment loss only if the carrying amount of a
long-lived asset is not recoverable from

                                       F-7
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


its undiscounted cash flows and (b) measurement of an impairment loss as the
difference between the carrying amount and fair value of the asset.

LOAN FEES: Included in other assets are costs associated with long-term debt.
These costs are being amortized over the life of the loan using a method that
approximates the interest method.

REVENUE AND ROYALTY DISTRIBUTIONS PAYABLE: For certain oil and natural gas
properties, GMX receives production proceeds from the purchaser and further
distributes such amounts to other revenue and royalty owners. Production
proceeds applicable to other revenue and royalty owners are reflected as revenue
distributions payable in the accompanying balance sheets. GMX accrues revenue
for only its net interest in oil and gas properties.

REVENUE RECOGNITION AND NATURAL GAS BALANCING: Oil and gas revenues are
recognized when sold. During the course of normal operations, the Company and
other joint interest owners of natural gas reservoirs will take more or less
than their respective ownership share of the natural gas volumes produced. These
volumetric imbalances are monitored over the lives of the wells' production
capability. If an imbalance exists at the time the wells' reserves are depleted,
cash settlements are made among the joint interest owners under a variety of
arrangements.

The Company follows the sales method of accounting for gas imbalances. A
liability is recorded when the Company's excess takes of natural gas volumes
exceed its estimated remaining recoverable reserves. No receivables are recorded
for those wells where the Company has taken less than its ownership share of gas
production. There are no significant imbalances as of December 31, 2004 or 2005.

CAPITALIZED INTEREST: Interest of $31,170 was capitalized related to the
unproved properties that were not being currently depreciated, depleted, or
amortized and on which development activities were not in progress in 2005.

INCOME TAXES: The Company accounts for income taxes using the asset and
liability method. Under the asset and liability method, deferred tax assets and
liabilities are recognized at the enacted tax rates for the future tax
consequences attributable to differences between the financial carrying amounts
of existing assets and liabilities and the respective tax bases and tax
operating losses and tax credit carryforwards. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.

HEDGING AND RISK MANAGEMENT ACTIVITIES: The Company may enter into oil and gas
price swaps to manage its exposure to oil and gas price volatility. The
instruments are usually placed with counterparties that the Company believes are
minimal credit risks. The oil and gas reference prices upon which the risk
management instruments are based reflect various market indices that have a high
degree of historical correlation with actual prices received by the Company.


                                       F-8
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses are
reported net of amounts allocated to working interest owners of the oil and gas
properties operated by the Company and net of amounts capitalized pursuant to
the full cost method of accounting.

USE OF ESTIMATES: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires the use of estimates and assumptions that affect the amounts reported.
The actual results could differ from those estimates, including useful lives of
property and equipment, oil and gas reserve quantities, and expenses associated
with asset retirements.

FINANCIAL INSTRUMENTS: The Company's financial instruments consist of cash,
accounts receivable, accounts payable, accrued expenses, accrued interest,
revenue distributions payable, long-term debt, and oil and natural gas price
swap and options agreements. Fair value of non-derivative financial instruments
approximates carrying value due to the short-term nature of these instruments.
Since the interest rate on the long-term debt reprices frequently, the fair
value of the long-term debt approximates the carrying value.

BASIC EARNINGS PER SHARE AND DILUTED EARNINGS PER SHARE: Basic earnings per
share ("EPS") of common stock have been computed on the basis of the weighted
average number of shares outstanding during each period. The diluted EPS of
common stock includes the effect of outstanding stock options and warrants which
are dilutive.

The table below reflects the amount of options not included in the diluted EPS
calculation above, as they were antidilutive.

                                                        2004           2005
                                                   -------------  --------------
        Options excluded from dilution calculation     41,000         77,000
        Range of exercise prices                   $5.00 - $8.00  $20.01- $29.00
        Weighted average exercise price                $6.75          $20.98

STOCK OPTIONS: The Company applies the intrinsic value-based method of
accounting for its fixed plan stock options, as described by Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees," and
related interpretations. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock exceeded
the exercise price of the option. SFAS 123, "Accounting for Stock-Based
Compensation," established accounting and disclosure requirements using a fair
value-based method of accounting for stock-based employee compensation plans. As
allowed by Statement 123 and the rules of the SEC, GMX has elected to continue
to apply the intrinsic value based method of accounting described above through
December 31, 2005.

Stock option activity for the year ended December 31, 2004 and 2005, which
includes in 2003 shares granted to a consultant, is as follows:

                                       F-9
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


                                                   NUMBER       WEIGHTED AVERAGE
                                                 OF SHARES       EXERCISE PRICE
                                                ------------      ------------
       Balance as of December 31, 2003               139,000      $       5.69
            Granted                                  190,000              3.83
            Exercised                                (15,000)             1.00
            Forfeited                                     --                --
            Expired                                       --                --
                                                ------------      ------------
       Balance as of December 31, 2004               314,000      $       3.67
            Granted                                  137,000             16.58
            Exercised                               (128,250)             2.69
            Forfeited                                     --                --
            Expired                                       --                --
                                                ------------      ------------
       Balance as of December 31, 2005               322,750      $       8.65
                                                ------------      ------------

At December 31, 2005, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $1.00 to $29.79 and nine
years, respectively.

At December 31, 2005, the number of options exercisable was 322,750 and the
weighted-average exercise price of those options was $8.65.

The Company applied APB Opinion No. 25 in accounting for its plan and
accordingly, no compensation cost has been recognized for its stock options
granted to employees in the financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under Statement 123, the Company's results would have been reduced by
the pro forma amounts indicated below.

                                                    2004              2005
                                                ------------      ------------
       Net earnings as reported                 $  1,441,773      $  7,156,096

       Add:  Stock-based compensation recognized          --           163,379

       Deduct: Pro forma stock-based
               compensation, net of tax             (316,085)         (467,085)
                                                ------------      ------------
       Pro forma net earnings                   $  1,125,688      $  6,852,390
                                                ============      ============
       Pro forma earnings per share - basic     $       0.15              0.78
                                                ============      ============
       Pro forma earnings per share - diluted   $       0.15              0.75
                                                ============      ============


For the January 2005 options, fair value was determined using the Black Scholes
option pricing model with the following assumptions: expected dividend yield of
0%, risk-free interest rate of 1%, expected volatility of 132%, and an expected
term of 10 years. For the April 2005 options, fair value was determined using
the Black-Scholes option pricing model with the following assumptions: expected
dividend yield of 0%, risk-free interest rate of 1%, expected volatility of
133%, and an expected term of 10 years.

For the September 2005 options, fair value was determined using the Black
Scholes option pricing model with the following assumptions: expected dividend
yield of 0% risk-free interest rate of 1%, expected volatility of 144%, and an
expected term of 10 years. For the

                                      F-10
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


October 2005 options, fair value was determined using the Black Scholes option
pricing model with the following assumptions: expected dividend yield of 0%,
risk-free interest rate of 4%, expected volatility of 140%, and an expected term
of 10 years. For the November 2005 options, fair value was determined using the
Black Scholes option pricing model with the following assumptions: expected
dividend yield of 0%, risk-free interest rate of 4%, expected volatility of
140%, and an expected term of 10 years.

COMMITMENTS AND CONTINGENCIES: Liabilities for loss contingencies arising from
claims, assessments, litigation, or other sources are recorded when it is
probable that a liability has been incurred and the amount can be reasonably
estimated.

Environmental expenditures are expensed or capitalized in accordance with
accounting principles generally accepted in the United States of America.
Liabilities for these expenditures are recorded when it is probable that
obligations have been incurred and the amounts can be reasonably estimated.

RECLASSIFICATION: Certain prior year balances have been reclassified to conform
to the current year presentation.

SEGMENT INFORMATION: GMX manages its business by country, which results in one
operating segment during each of the years ended December 31, 2004 and 2005.

ASSET RETIREMENT OBLIGATIONS: Below is a reconciliation of the beginning and
ending aggregate carrying amount of the Company's asset retirement obligations.


       Balance as of December 31, 2003               $    304,037
       Liabilities incurred                                40,493
       Liabilities settled                               (249,867)
       Accretion (1)                                       24,323
       Increase due to Revisions                        1,645,645
                                                     ------------
       Balance as of December 31, 2004               $  1,764,631
       Liabilities incurred                               295,756
       Liabilities settled                               (474,603)
       Accretion (1)                                       70,585
       Increase due to revisions (2)                      555,862
                                                     ------------
       Balance as of December 31, 2005               $  2,212,233
                                                     ============

(1) Annual accretion is added to the full cost pool.
(2) Revisions were due to the increase in market prices for PersonNameservices
    related to plugging a well, the current inflation rate and interest rate.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: In December 2004, the FASB issued
Statement on Financial Accounting Standards No. 123 (Revised 2004), "Share-Based
Payment," revising FASB Statement 123, "Accounting for Stock-Based


                                      F-11
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


Compensation" and superseding APB Opinion No. 25, "Accounting for Stock Issued
to Employees." This statement requires a public entity to measure the cost of
PersonNameservices provided by employees and directors received in exchange for
an award of equity instruments, including stock options, at a grant-date fair
value. The fair value cost is then recognized over the period that
PersonNameservices are provided. FAS 123 (Revised 2004) is effective for the
first fiscal year beginning after September, 2005 and will be adopted by the
Company in the first quarter of 2006. See "Stock Options" above for a disclosure
of the effect on net income and earnings per share for the years 2004 and 2005
if we had applied the fair value recognition provisions of FAS 123 to
stock-based employee compensation.

The FASB issued Statement on Financial Accounting Standards No. 153, "Exchanges
of Productive Assets," in December 2004 that amended APB Opinion No. 29,
"Accounting for Nonmonetary Transactions." FAS 153 requires that nonmonetary
exchanges of similar productive assets are to be accounted for at fair value.
Previously these transactions were accounted for at book value of the assets.
This statement is effective for nonmonetary transactions occurring in fiscal
periods beginning after June 15, 2005. The adoption of this statement has not
had a material impact on our results of operations or financial condition.

On June 1, 2005, the FASB issued SFAS Statement No. 154, "Accounting Changes and
Error Corrections" (SFAS No. 154), which will require entities that voluntarily
make a change in accounting principle to apply that change retrospectively to
prior periods' financial statements, unless this would be impracticable. SFAS
No. 154 supersedes Accounting Principles Board Opinion No. 20, "Accounting
Changes' (APB 20), which previously required that most voluntary changes in
accounting principle be recognized by including in the current period's net
income the cumulative effect of changing to the new accounting principle. SFAS
No. 154 also makes a distinction between "retrospective application" of an
accounting principle and the "restatement" of financial statements to reflect
the correction of an error.

Another significant change in practice under SFAS no. 154 will be that if an
entity changes its method of depreciation, amortization, or depletion for
long-lived, non-financial assets, the change must be accounted for as a change
in accounting estimate. Under APB 20, such a change would have been reported as
a change in accounting principle. SFAS No. 154 applies to accounting changes and
error corrections that are made in fiscal years beginning after December 15,
2005. We do not anticipate any material impact from implementation of this
accounting standard.





                                      F-12
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


NOTE B--PROPERTY AND EQUIPMENT

Property and equipment included the following:
<TABLE><CAPTION>
                                                                     DECEMBER 31,
                                                             ----------------------------
                                                                 2004            2005
                                                             ------------    ------------
       <S>                                                   <C>             <C>
       Oil and gas properties:
          Subject to amortization                            $ 41,893,564    $ 67,130,448
          Not subject to amortization: Acq. In 2005                             1,264,680
             Acquired in 2004                                     447,786         432,880
             Acquired in 2003                                          --              --
             Acquired in 2002                                      76,829          80,156
             Acquired in 2001                                      34,791          21,100
          Accumulated depreciation, depletion, and
          amortization                                         (6,496,210)     (9,992,867)
                                                             ------------    ------------
             Net oil and gas properties                        35,956,760      58,927,397
                                                             ------------    ------------
       Other property and equipment                             3,515,422      17,044,734
       Less accumulated depreciation                           (1,308,358)     (1,793,781)
                                                             ------------    ------------

             Net other property and equipment                   2,207,064      15,250,953
                                                             ------------    ------------
               Property and equipment, net of accumulated
                 Depreciation, depletion, and amortization   $ 38,163,824    $ 74,178,350
                                                             ============    ============
</TABLE>


Depreciation, depletion, and amortization of property and equipment consisted of
the following components:
<TABLE><CAPTION>
                                                                 FOR THE YEAR ENDED
                                                                     DECEMBER 31,
                                                             ----------------------------
                                                                 2004            2005
                                                             ------------    ------------
       <S>                                                   <C>             <C>
       Depreciation, depletion, and amortization of oil
          and gas properties                                 $  1,707,431    $  3,496,657
       Depreciation of other property and equipment               336,054         485,422
                                                             ------------    ------------
                  Total                                      $  2,043,485    $  3,982,079
                                                             ============    ============
</TABLE>










                                      F-13
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


NOTE C--LONG-TERM DEBT
<TABLE><CAPTION>
                                                                            DECEMBER 31,
                                                                    ---------------------------
                                                                        2004           2005
                                                                    ------------   ------------
       <S>                                                          <C>            <C>
       Note payable to bank, maturity date of September, 2006,
       bearing a variable interest rate (5.25% as of December 31,
       2005) collateralized by producing oil and gas properties     $  1,849,837   $        N/A

       Note payable to bank, maturity date of July 2008 bearing a
       variable interest rate (7.5% as of December 31, 2005)
       collateralized by oil and gas properties                              N/A          1,000

       Joint venture partner project (financing, non-recourse, no
       interest rate)                                                   1,912,45      1,755,002
                                                                    ------------   ------------
                                                                       3,762,294      1,756,002
       Current portion                                                   433,933        345,967
                                                                    ------------   ------------
          Long Term                                                 $  3,328,361   $  1,410,035
</TABLE>


       Maturities of long-term debt are as follows:
<TABLE><CAPTION>
                                                           YEAR        AMOUNT
                                                        ----------  ------------
<S>                                                     <C>         <C>
                                                           2006     $    345,967
                                                           2007          271,855
                                                           2008          295,957
                                                           2009          215,743
                                                           2010          168,784
                                                      2011-2015          406,440
                                                      2016-2020           51,256
                                                                    ------------
                                                                    $  1,756,002
                                                                    ============
</TABLE>

2005 CREDIT FACILITY

On July 29, 2005, the Company entered into a new secured credit facility, which
replaced a prior credit facility. The new credit facility provides for a line of
credit of up to $50,000,000 (the "Commitment"), subject to a borrowing base
which is based on a periodic evaluation of oil and gas reserves which is reduced
monthly to account for production ("Borrowing Base"). The amount of credit
available at any one time under the credit facility is the lesser of the
Borrowing Base or the amount of the Commitment. Borrowings bear interest at the
prime rate or LIBOR plus 1.50% to 2.25% depending on the level of borrowings
relative to the Borrowing Base. The credit facility requires payment of an
annual facility fee equal to 1/4% on the unused amount of the Borrowing Base.
The Company is obligated to make principal payments if the amount outstanding
would exceed the Borrowing Base. Borrowings under the credit agreement are
secured by substantially all of the Company's oil and gas properties. The amount
of this Borrowing Base has been adjusted from time to time. On October 25, 2005,
the bank increased the Borrowing Base to $24,000,000, with quarterly commitment
reduction of $1,500,000. At December 31, 2005, the Company had $1,000 of
borrowings under the credit facility. The credit facility matures in July 2008.

                                      F-14
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


The credit facility contains various affirmative and restrictive covenants.
These covenants, among other things, prohibit additional indebtedness, sales of
assets, mergers and consolidations, dividends and distributions, changes in
management and require the maintenance of various financial ratios.

PVOG FINANCING

In 2004, GMX entered into an arrangement with PVOG to purchase dollar
denominated production payments from the Company on wells drilled with a second
rig during a portion of 2004. Under this agreement, PVOG provided to GMX $1.9
million in funding for GMX's share of costs of four wells drilled with the
second rig which is repayable solely from 75% of GMX's share of production
revenues from these wells without interest. As of December 31, 2005, the amount
owed under this arrangement was $1,755,002.

NOTE D--INCOME TAXES

Intangible development costs may be capitalized or expensed for income tax
reporting purposes, whereas they are capitalized and amortized for financial
statement purposes. Lease and well equipment and other property and equipment
are depreciated for income tax reporting purposes using accelerated methods.
Deferred income taxes are provided on these temporary differences to the extent
that income taxes which otherwise would have been payable are reduced. Deferred
income tax assets also are recognized for operating losses that are available to
offset future income taxes.

Deferred income tax assets also are recognized for operating losses that are
available to offset future income taxes.

At December 31, 2005, the Company had the following carryforwards available to
reduce future income taxes:

       Net Operating Losses:
           Federal                                     $  26,835,000
           State                                           2,466,000
       Statutory depletion                                 6,691,000



                                      F-15
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


The net operating loss and statutory depletion carryforward amounts shown above
have been utilized for financial purposes to offset existing deferred tax
liabilities. The net operating loss carryforwards expire from 2018 to 2021. The
Company's net operating loss has an annual limitation under Internal Revenue
Code Section 382. Statutory depletion carryforwards do not expire.

The following table sets forth the Company's deferred tax assets and
liabilities.

                                                        DECEMBER 31,
                                                ----------------------------
                                                    2004            2005
                                                ------------    ------------
       Deferred tax assets:
           Net operating loss carry forwards       9,255,000       9,272,000
           Statutory depletion carry forwards      1,261,000       2,274,900
                                                ------------    ------------
                  Total                           10,516,000      11,546,900
                                                ------------    ------------
       Deferred tax liability:
           Property, plant and equipment         (10,287,000)    (12,759,000)
           Valuation allowance                      (229,000)             --
                                                ------------    ------------
                  Total                          (10,516,000)    (12,759,000)
                                                ------------    ------------
       Net deferred tax liability                         --      (1,212,100)
                                                ============    ============

As of December 31, 2005, a deferred tax liability of $12,759,000 was primarily
associated with the difference between financial carrying value of oil and gas
properties and the associated tax basis. As of the same date, the Company's
gross deferred tax asset of $11,546,900 was primarily the result of the net
operating loss and statutory depletion carryforwards.

Total income tax expense for the respective years differed from the amounts
computed by applying the U.S. federal tax rate to earnings before income taxes
as a result of the following:

                                                    FOR THE YEAR ENDED
                                                        DECEMBER 31,
                                                ----------------------------
                                                    2004            2005
                                                ------------    ------------
       U.S. statutory tax rate                            34%             34%
       Statutory depletion                               (25)            (12)
       Change in valuation allowance                     (24)             (8)
       Other                                              16             -0-
                                                ------------    ------------
       Effective income tax rate                           1%             14%
                                                ============    ============

NOTE E--COMMITMENTS AND CONTINGENCIES

The Company is party to various other legal actions arising in the normal course
of business. Matters that are probable of unfavorable outcome to the Company and
which can be reasonably estimated are accrued. Such accruals are based on
information known about the matters, the Company's estimates of the outcomes of
such matters, and its experience in contesting, litigating, and settling similar
matters. None of the actions are believed by management to involve future
amounts that would be material to the Company's financial position or results of
operations after consideration of recorded accruals.

                                      F-16
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


OPERATING LEASES: The following is a schedule by year of future minimum rental
payments required under operating leases that have initial or remaining
non-cancelable lease terms in excess of one year as of December 31, 2005.

       Year Ending December 31:

       2006                                     $    118,522
       2007                                           33,217
       2008                                           18,344
       2009                                           18,344
       2010                                           18,344
                                                ------------
          Total                                 $    206,771
                                                ============

Total rental expense for all operating leases is as follows for the years ended
December 31:

       2004                                     $    153,613
       2005                                          118,701


NOTE F--SHAREHOLDERS' EQUITY

In October 2000, the board of directors and shareholders adopted the GMX
Resources Inc. Stock Option Plan (the "Option Plan"). Under the Option Plan, the
Company may grant both stock options intended to qualify as incentive stock
options under Section 422 of the Internal Revenue Code and options which are not
qualified as incentive stock options. Options may be granted under the Option
Plan to key employees and nonemployee directors.

The maximum number of shares of common stock issuable under the Option Plan is
550,000, subject to appropriate adjustment in the event of a reorganization,
stock split, stock dividend, reclassification or other change affecting the
Company's common stock. All executive officers and other key employees who hold
positions of significant responsibility are eligible to receive awards under the
Option Plan. In addition, each director of the Company is eligible to receive
options under the Option Plan. The exercise price of options granted under the
Option Plan is not less than 100% of the fair market value of the shares on the
date of grant. Options granted under the Plan become exercisable as the board
may determine in connection with the grant of each option. In addition, the
board may at any time accelerate the date that any option granted becomes
exercisable.

The board of directors may amend or terminate the Option Plan at any time,
except that no amendment will become effective without the approval of the
shareholders except to the extent such approval may be required by applicable
law or by the rules of any securities exchange upon which the Company shares are
admitted to listed trading. The Option Plan will terminate in 2010, except with
respect to awards then outstanding.

In January 2004, the Company raised $1 million from the sale of 11% senior
subordinated notes due January 31, 2007 and five-year detachable warrants to
purchase 175,000 shares of common stock for $1.50 per share. The price of the
Company's common shares as of that

                                      F-17
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


date was $3.16. The fair market value of the warrants in the amount of $257,250
were costs of acquiring the debt and amortized over the life of the debt. These
warrants were all exercised for total proceeds of $262,500 in June 2004.

In addition, in April 2004 the Company closed a private placement of 200,000
shares of common stock for $1,000,000 with a single institutional investor.
Also, in June 21, 2004, the Company closed a private placement of 1,100,000
shares of common stock for $7,535,000 with several institutional investors.
Proceeds of the transactions will be used for general corporate purposes.

In July 2005, the Company completed a private placement with several
institutional investors of 1,600,000 shares on common stock for $21,500,000.
Proceeds of the transaction will be used for general corporate purposes.

The Company's Class A warrants allow holders to purchase common shares of the
Company for $12.00 per share until February 13, 2006 and were issued in
connection with the Company's initial public offering in 2001. During the 4th
quarter of 2004, the Company repurchased 94,600 Class A warrants for $61,930.
Subsequent to the end of the year, the Company received $14,000,000 from the
exercise of warrants.

NOTE G--MAJOR CUSTOMERS

Sales to individual customers constituting 10% or more of total oil and gas
sales for each of the years ended December 31, 2004 and 2005 were as follows:

                                                    2004            2005
                                                ------------    ------------
       Penn Virginia Oil & Gas (Oil)                      --              27%
       Teppco Crude (Oil)                                 93%             65%
       CrossTex Energy Services, Inc. (Gas)               63%             44%
       Penn Virginia Oil & Gas (Gas)                      21%             48%
       Duke Energy (Gas)                                  10%              7%

NOTE H--CONCENTRATION OF CREDIT RISK

The Company maintains its cash in bank deposit accounts which, at times, may
exceed federal insured limits. The Company has not experienced any losses in
such accounts and believes it is not exposed to any significant risk.

NOTE I--RETIREMENT PLANS

The GMX Resources Inc. 401(k) Plan was adopted April 15, 2001, and was
reinstated effective January 1, 2005. The plan is a qualified retirement plan
under the Internal Revenue Code. All employees are eligible who have attained
age 21. GMX matches the employee contributions dollar for dollar up to 5% of the
employees compensation; the Company contributed $42,875 and $-0- in 2005 and
2004, respectively.


                                      F-18
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


NOTE J--CORRECTION OF AN ERROR

The balance sheet line item description for preferred stock has been revised.
The previous description, "Preferred Stock, par value $0.01 per share, 500,000
shares authorized" has been corrected to "Preferred Stock, par value $0.001 per
share, 10,000,000 shares authorized, 25,000 shares designated as Series A Junior
Participating Preferred Stock, none issued and outstanding." This correction has
no effect on total assets, liabilities, shareholders equity or net income of the
Company.

NOTE K--OIL AND GAS OPERATIONS (UNAUDITED)

Capitalized costs related to the Company's oil and gas producing activities as
of December 31, 2004 and 2005 are:

                                                    2004            2005
                                                ------------    ------------
       Unproved properties                      $    559,407    $  1,789,816
       Producing properties                       41,893,563      67,130,448
                                                ------------    ------------

                                                  42,452,970      68,920,264
       Less accumulated depreciation,
         depletion, and Amortization              (6,496,210)     (9,992,867)
                                                ------------    ------------
                  Net capitalized costs         $ 35,956,760    $ 58,927,397
                                                ============    ============

Unproved properties include leaseholds under exploration. Producing properties
include mineral properties with proved reserves, development wells, and
uncompleted development well costs. Support equipment and facilities include
costs for pipeline facilities, field equipment, and other supporting assets
involved in oil and gas producing activities. The accumulated depreciation,
depletion, and amortization represent the portion of the assets which has been
charged to expense.

Costs incurred in oil and gas property acquisitions, exploration, and
development activities in 2004 and 2005 are as follows:

                                                    2004            2005
                                                ------------    ------------
       Property acquisition costs - proved      $         --    $         --
       Property acquisition costs - unproved         851,617       1,230,409
       Development costs                           9,152,257      24,789,281
                                                ------------    ------------
                                                $ 10,003,874    $ 26,019,690
                                                ============    ============

Developments costs above include non-cash asset retirement costs of $377,017.

Development costs include the cost of drilling and equipping development wells
and constructing related production facilities for extracting, treating,
gathering, and storing oil and gas from proved reserves.


                                      F-19
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


The Company's results of operations in 2004 and 2005 include revenues and
expenses associated directly with oil and gas producing activities.


                                                    2004            2005
                                                ------------    ------------
       Oil and gas sales                        $  7,689,882    $ 19,026,050
       Production costs                           (1,779,830)     (3,311,624)
       Depreciation, depletion and amortization   (1,707,431)     (3,496,657)
       Income tax expense                         (1,047,075)     (1,212,100)
                                                ------------    ------------
       Results of operations for oil and gas
            producing activities                $  3,155,546    $ 11,005,669
                                                ============    ============


























                                      F-20
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


NOTE L--SUPPLEMENTAL INFORMATION ON OIL AND GAS OPERATIONS (UNAUDITED)

The oil and gas reserve quantity information presented below is unaudited and is
based upon reports prepared by independent petroleum engineers. The information
is presented in accordance with regulations prescribed by the Securities and
Exchange Commission. The Company emphasizes that reserve estimates are
inherently imprecise. The Company's reserve estimates were estimated by
performance methods, volumetric methods, and comparisons with analogous wells,
where applicable. The reserves estimated by the performance method utilized
extrapolations of historical production data. Reserves were estimated by the
volumetric or analogous methods in cases where the historical production data
was insufficient to establish a definitive trend. Accordingly, these estimates
are expected to change, and such changes could be material and occur in the near
term as future information becomes available.

Proved oil and gas reserves represent the estimated quantities of crude oil,
natural gas, and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions. Proved
developed oil and gas reserves are those expected to be recovered through
existing wells with existing equipment and operating methods. As of December 31,
2004 and 2005, all of the Company's oil and gas reserves were located in the
United States.
<TABLE><CAPTION>
                                                              OIL            GAS
                                                            (MBBLS)         (MMCF)
                                                         ============    ============
       <S>                                               <C>             <C>
       DECEMBER 31, 2004
          Proved reserves, beginning of period                  1,323          45,029
          Extensions, discoveries, and other additions             51          14,644
          Production                                              (30)         (1,049)
          Revisions of previous estimates                        (107)         (1,736)
                                                         ------------    ------------
          Proved reserves, end of period                        1,237          56,888
                                                         ============    ============
          Proved developed reserves:
              Beginning of period                                 568          18,277
                                                         ============    ============
              End of period                                       584          18,980
                                                         ============    ============
       DECEMBER 31, 2005
          Proved reserves, beginning of period                  1,237          56,888
          Extensions, discoveries, and other additions            694          84,026
          Production                                              (48)         (1,930)
          Revisions of previous estimates                          88          11,192
                                                         ------------    ------------
          Proved reserves, end of period                        1,971         150,176
                                                         ============    ============
          Proved developed reserves:
              Beginning of period                                 584          18,980
                                                         ============    ============
              End of period                                       770          41,503
                                                         ============    ============
</TABLE>

Future cash inflows and future production and development costs are determined
by applying year-end prices and costs to the estimated quantities of oil and gas
to be produced. Estimates

                                      F-21
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005


are made of quantities of proved reserves and the future periods during which
they are expected to be produced based on year-end economic conditions.
Estimated future income taxes are computed using current statutory income tax
rates including consideration of the current tax bases of the properties and
related carryforwards giving effect to permanent differences. The resulting
future net cash flows are reduced to present value amounts by applying a 10%
annual discount factor.

The assumptions used to compute the standardized measure are those prescribed by
the Financial Accounting Standards Board, and, as such do not necessarily
reflect the Company's expectations of actual revenue to be derived from those
reserves nor their present worth. The limitations inherent in the reserve
quantity estimation process, as discussed previously, are equally applicable to
the standardized measure computations since these estimates are the basis for
the valuation process.

The following summary sets forth the Company's future net cash flows relating to
proved oil and gas reserves based on the standardized measure prescribed in
Statement of Financial Accounting Standards No. 69.

                                                 DECEMBER 31,    DECEMBER 31,
                                                    2004            2005
                                                ------------    ------------
                                               (IN THOUSANDS)  (IN THOUSANDS)

       Future cash inflows                      $    375,427    $  1,648,402
       Future production costs                       (94,338)       (373,614)
       Future development costs                      (66,811)       (190,700)
       Future income tax provisions                  (42,926)       (283,784)
                                                ------------    ------------
          Net future cash inflows                    165,352         800,304
       Less effect of a 10% discount factor         (101,120)       (497,908)
                                                ------------    ------------
          Standardized measure of discounted
             future net cash flows              $     64,251    $    302,396
                                                ============    ============

Oil and condensate prices were based on an equivalent base price of $61.04 per
barrel for benchmark posted West Texas Intermediate Crude Oil at closing on
December 31, 2005. Adjustments to the base price were made to each lease to
adjust the base price for crude oil quality, contractual agreements, and
regional price variations. The average oil price used in the reserve estimates
was $57.19 per barrel. Natural gas prices were based on an equivalent base price
of $11.23 per million British thermal unit (mmbtu) for the composite Henry Hub
Spot Market benchmark price at closing on December 31, 2005. Adjustments to the
base price were made to each lease to adjust the base price for quality,
contractual agreements, and regional price variations. The average natural gas
price used in the reserve estimates was $10.23 per mmbtu. Future income tax
expenses are computed by applying the appropriate statutory rates to the future
pre-tax net cash flows relating to proved reserves, net of the tax basis of the
properties involved giving effect to permanent differences, tax credits, and
allowances relating to proved oil and gas reserves.

Principal changes in the standardized measure of discounted future net cash
flows attributable to the Company's proved reserves are as follows:


                                      F-22
<PAGE>
                       GMX RESOURCES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2005



                                                 DECEMBER 31,    DECEMBER 31,
                                                    2004            2005
                                               (IN THOUSANDS)  (IN THOUSANDS)
                                                ------------    ------------

       Standardized measure, beginning of year  $     47,975    $     64,231
       Sales of oil and gas, net of production
          costs                                       (5,910)        (15,714)
       Net changes in prices and production costS      4,409          49,869
       Extensions and discoveries, net of future
          development costs                           18,949         223,384
       Development costs that reduced future
          development costs                            6,863          23,629
       Revisions of quantity estimates                (4,035)         26,174
       Sales of reserves in place                         --              --
       Accretion of discount                          (1,149)         97,164
       Other                                          (9,379)        (78,118)
       Net changes in income taxes                     4,210         (88,223)
                                                ------------    ------------
       Standardized measure, end of year        $     64,231    $    302,396
                                                ============    ============


























                                      F-23
<PAGE>

                                  EXHIBIT INDEX
                                  -------------

Exhibit No.    Description
-----------    -----------

3.1            Amended and Restated Certificate of Incorporation of GMX
               Resources Inc. (Incorporated by reference to Exhibit 3.1 to the
               Registration Statement on Form SB-2, File No. 333-49328)

3.2            Amended Bylaws of GMX Resources Inc. (Incorporated by reference
               to Exhibit 3.2 to Annual Report on Form 10-KSB for the year ended
               December 31, 2004)

3.3            Certificate of Designation of Series A Junior Participating
               Preferred Stock of GMX Resources Inc. dated May 17, 2005
               (incorporated by reference to Exhibit 3.1 to Form 8-K filed May
               18, 2005)

4.1            Warrant Agreement with form of Warrant for the February 12, 2001
               Public Offering (Incorporated by reference to Exhibit 4.1 to the
               Registration Statement on Form SB-2, File No. 333-49328)

4.2            Form of Underwriters' Warrant for the February 12, 2001 Public
               Offering (Incorporated by reference to Exhibit 4.2 to
               Registration Statement on Form SB-2, File No. 333-49328)

4.3            Form of Underwriters' Warrant for the July 17, 2001 Secondary
               Offering (Incorporated by reference to Exhibit 4.2 to the
               Registration Statement on Form SB-2, File No. 333-65436)

4.4            Rights Agreement dated May 17, 2005 by and between GMX Resources
               Inc. and UMB Bank, N.A., as Rights Agent (Incorporated by
               reference to Exhibit 4.1 to Form 8-K filed May 18, 2005)

10.1           Stock Option Plan, as amended (Incorporated by reference to
               Exhibit 10.2 to the Registration Statement on Form SB-2, File No.
               333-49328)

10.2           Form of Director Indemnification Agreement (Incorporated by
               reference to Exhibit 10.5 to the Registration Statement on Form
               SB-2, File No. 333-49328)

10.3           Participation Agreement dated December 29, 2003 by and among Penn
               Virginia Oil & Gas Company, the Company and its wholly owned
               subsidiaries (Incorporated by reference to Exhibit 10.1 to
               Current Report on Form 8-K dated December 29, 2003)

10.3(a)        First Amendment dated February 27, 2004 to Participation
               Agreement between GMX Resources Inc. and Penn Virginia Oil & Gas
               Corporation (Incorporated by reference to Exhibit 10.1 to Current
               Report on Form 8-K filed September 14, 2004)

10.3(b)        Second Amendment dated May 9, 2004 to Participation Agreement
               between GMX Resources Inc. and Penn Virginia Oil & Gas
               Corporation (Incorporated by reference to Exhibit 10.2 to Current
               Report on Form 8-K filed September 14, 2004)

10.3(c)        Third Amendment dated April 6, 2004 to Participation Agreement
               between GMX Resources Inc. and Penn Virginia Oil & Gas
               Corporation (Incorporated by reference to Exhibit 10.3 to Current
               Report on Form 8-K filed September 14, 2004)

10.3(d)        Fourth Amendment dated August 11, 2004 to Participation Agreement
               between GMX Resources Inc. and Penn Virginia Oil & Gas
               Corporation (Incorporated by reference to Exhibit 10.4 to Current
               Report on Form 8-K filed September 14, 2004)

10.3(e)        Fifth Amendment dated effective January 1, 2005 to Participation
               Agreement between GMX Resources Inc. and Penn Virginia Oil & Gas
               L.P., successor to Penn Virginia Oil & Gas Corporation
               (Incorporated by reference to Exhibit 10.6(e) to Quarterly Report
               on Form 10-QSB for the quarter ended March 31, 2005, filed May
               12, 2005)
<PAGE>

Exhibit No.    Description
-----------    -----------

10.3(f)        Sixth Amendment dated effective January 1, 2006, to Participation
               Agreement between GMX Resources Inc. and Penn Virginia Oil & Gas
               L.P., successor to Penn Virginia Oil & Gas Corporation
               (Incorporated by reference to Exhibit 10.1 to Form 8-K filed
               January 20, 2006)

10.4           Loan Agreement dated July 29, 2005 between GMX Resources Inc. and
               Hibernia National Bank. (Incorporated by reference to Exhibit
               10.1 to Current Report on Form 8-K filed on August 4, 2005)

10.4(a)        Interim Agreement dated November 3, 2005 between GMX Resources
               Inc. and Hibernia National Bank (Incorporated by reference to
               Exhibit 10.4(a) to Form 10-KSB filed March 31, 2006)

10.4(b)        Second Amendment to Loan Agreement dated December 20, 2005,
               between GMX Resources Inc. and Hibernia National Bank

10.5           Asset Purchase Agreement dated December 8, 2005 between GMX
               Resources Inc. and McLachlan Drilling Co. (Incorporated by
               reference to Exhibit 10.1 to Form 8-K filed December 12, 2005)

10.6           Texas Deed of Trust, Mortgage, Assignment, Security Agreement,
               Fixture Filing and Financing Statement dated as of November 3,
               2005 from GMX Resources Inc. to Hibernia National Bank
               (Incorporated by reference to Exhibit 10.16 to Form 10-Q for the
               quarter ended September 30, 2005)

14             Code of Business Conduct and Ethics (Incorporated by reference to
               Exhibit 14 to Annual Report on Form 10-KSB for the year ended
               December 31, 2003)

21             List of Subsidiaries (Incorporated by reference to Exhibt 21 to
               Form 10-KSB for the year ended December 31, 2005)

23.1           Consent of Smith, Carney & Co., p.c.

23.2           Consent of Sproule Associates, Inc. (Incorporated by reference to
               Exhibit 21 to Form 10-KSB for the year ended December 31, 2005)

31.1           Rule 13a-14(a) Certification of Chief Executive Officer

31.2           Rule 13a-14(a) Certification of Chief Financial Officer

32.1           Certification of Chief Executive Officer pursuant to 18 U.S.C.
               ss. 1350.

32.2           Certification of Chief Financial Officer pursuant to 18 U.S.C.
               ss. 1350.