GMX RESOURCES INC.

AUDIT COMMITTEE CHARTER

 As Amended and Approved by the Board May 27, 2004

Purpose

 The Audit Committee is appointed by the Board to assist the Board in monitoring (1) the integrity of the financial statements of the Company, (2) the independent auditor's qualifications and independence, (3) the performance of the Company's internal audit function and independent auditors, and (4) the compliance by the Company with legal and regulatory requirements.

 The Audit Committee shall prepare the report required by the rules of the Securities and Exchange Commission (the "Commission") to be included in the Company's annual proxy statement.

Committee Membership

The Audit Committee shall consist of no fewer than two members until no later than July 31, 2005 ("Compliance Date") when the Company is required to have at least three members to be in compliance with the Amended Corporate Governance Rules of the NASDAQ Stock Market, Inc. ("NASDAQ Rules").  After the Compliance Date, (i) the members of the Audit Committee shall meet the independence and experience requirements of the NASDAQ Rules, Section 10A(m)(3) of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the Commission; and (ii) at least one member of the Committee shall be financially sophisticated as contemplated by the NASDAQ Rules.  Until the Company attains compliance with the NASDAQ Rules, the membership of the Committee will comply with the existing rules of NASDAQ, which require no fewer than two independent members.

The Board shall use reasonable efforts to assure that at least one member of the Audit Committee shall be an audit committee "financial expert" as defined by the Commission.  Audit Committee members shall not simultaneously serve on the audit committees of more than two other public companies.  The members of the Audit Committee shall be appointed by the Board.  Audit Committee members may be replaced by the Board. Unless a Committee Chairman is elected by the full Board, the Committee members may designate a Chairman.

Meetings

The Audit Committee shall meet as often as it determines, but no less frequently than quarterly.  The Audit Committee shall meet periodically with management, the internal auditors and the independent auditor in separate executive sessions. The Audit Committee may request any officer or employee of the Company or the Company's outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.

Committee Authority and Responsibilities

The Audit Committee shall have the sole authority to appoint or replace the independent auditor.  The Audit Committee shall be directly responsible for the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work.  The independent auditor shall report directly to the Audit Committee.

The Audit Committee shall preapprove all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent auditor, subject to the de minimis exceptions for non-audit services described in Section 10(A)(i)(1)(B) of the Exchange Act which are approved by the Audit Committee prior to the completion of the audit.  The Audit Committee delegate pre-approval authority to one or more members when appropriate provided that any decisions to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting.

The Audit Committee shall have the authority, to the extent it deems necessary or appropriate, to retain outside legal, accounting or other advisors.  The Company shall provide for appropriate funding, as determined by the Audit Committee, for payment of compensation to the independent auditor and for payment of compensation to any outside legal, accounting or other advisors employed by the Audit Committee.

The Audit Committee shall make regular reports to the Board. The Audit Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval. The Audit Committee shall annually review the Audit Committee's own performance.

In addition to any other matters that the Board may assign to the Audit Committee, the Audit Committee shall:

A.        Financial Statement and Disclosure Matters

  1. Review and discuss with management and the independent auditor the annual audited financial statements, including disclosures made in management's discussion and analysis ("MD&A") of its Form 10-K filings, and recommend to the Board whether the audited financial statements should be included in the Company's Form 10-K.
  2. Review and discuss with management and the independent auditor the Company's quarterly financial statements prior to the filing of its Form 10-Q, including the results of the independent auditor's review of the quarterly financial statements.
  3. Discuss with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of the Company's financial statements, including any significant changes in the Company's selection or application of accounting principles, any major issues as to the adequacy of the Company's internal controls and any special steps adopted in light of material control deficiencies.
  4. Review and discuss at least annually prior to filing of the audit report with the Commission, reports from the independent auditors on:

(a)                All critical accounting policies and practices to be used.

(b)               All alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor.

(c)                Other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.

  1. Discuss with management the Company's earnings or sales or other financial press releases, including the use of "pro forma" or "adjusted" non-GAAP information, as well as financial information and earnings or sales guidance provided to analysts, rating agencies, in press releases or otherwise.  Such discussion may be done generally (consisting of discussing the types of information to be disclosed and the types of presentations to be made).
  2. Discuss with management and the independent auditor the effect of regulatory and accounting initiative as well as off-balance sheet structures on the Company's financial statements.
  3. Discuss with management the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company's risk assessment and risk management policies.
  4. Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.
  5. Review disclosures made to the Audit Committee by the Company's CEO and CFO during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company's internal controls.

B.         Oversight of the Company's Relationship with the Independent Auditor

  1. Review and evaluate the lead partner of the independent auditor team.
  2. Obtain and review a report from the independent auditor at least annually regarding (a) the independent auditor's internal quality-control procedures, (b) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, (c) any steps taken to deal with any such issues, and (d) all relationships between the independent auditor and the Company as required by Independence Standards Board Standard No. 1.  Evaluate the qualifications, performance and independence of the independent auditor, including considering whether the auditor's quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor's independence, taking into account the opinions of management and internal auditors.  The Audit Committee shall present its conclusions with respect to the independent auditor to the Board.
  3. Ensure the rotation of the audit partners as required by law.  Consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the independent auditing firm on a regular basis.
  4. Set the Board policies for the Company's hiring of employees or former employees of the independent auditor who participated in any capacity in the audit of the Company.
  5.  If necessary, discuss with the national office of the independent auditor issues on which they were consulted by the Company's audit team and matters of audit quality and consistency.
  1. Meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit.
  2. Obtain from the independent auditor assurances that Section 10B of the Exchange Act has not been implemented.

C.        Compliance Oversight Responsibilities

  1. Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
  2. Discuss with management and the independent auditor any correspondence with regulators or governmental agencies and any published reports which raise material issues regarding the Company's financial statements or accounting policies.
  3. Discuss with the Company's legal counsel any matters that may have a material impact on the financial statements or the Company's compliance policies.
  4. Review and approved all related party transactions in order to comply with applicable state corporate law, Commission disclosure rules and NASDAQ rules.
  5. Recommend and periodically review the Company's Code of Ethics.
  6. Receive and make an appropriate response to any "reports of a material violation" from any attorney performing legal services which such attorney is required to report if an appropriate response has not been made to a report of such material violation by the Chief Executive Officer.  For this purpose, a "report of a material violation" has the meaning contemplated by the "Standards of Professional Conduct for an Attorney Appearing and Practicing Before the Commission in the Representation of  an Issuer" promulgated by the Commission.

Limitation of Audit Committee's Role

While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations.  These are the responsibilities of management and the independent auditor.