UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                  FORM 10-QSB
                                   (Mark One)


        [X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                SECURITIES EXCHANGE ACT OF 1934


                 For the quarterly period ended March 31, 2005

                                       OR

       [ ]     TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15 (d) OF THE
               SECURITIES EXCHANGE ACT OF 1934


                For the transition period from ______ to ______

                          Commission File No. 0-20660


                              DIRECT INSITE CORP.
        (Exact name of Small Business Issuer as specified in its Charter)


              Delaware                                  11-2895590
   (State or other jurisdiction of                   (I.R.S. Employer
    incorporation or organization)                  Identification  No.)


    80 Orville Drive, Bohemia, N.Y.                      11716
(Address of principal executive offices)               (Zip Code)


Registrant's telephone number, including area code      (631) 244-1500

Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  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.

                          Yes     X           No


The number of shares of $.0001 par value  stock  outstanding  as of May 10, 2005
was: 4,516,985.

Transitional Small Business Disclosure Format (check one): Yes      No X
                                                               --      -
<PAGE>


                      DIRECT INSITE CORP. AND SUBSIDIARIES

                                     INDEX
<TABLE>
<CAPTION>
<S>                                                                                                              <C>
PART I - FINANCIAL INFORMATION                                                                                  Page

       Item 1

     Condensed Consolidated Balance Sheets as of March 31, 2005 (Unaudited) and
       December 31, 2004 .................................................................................        3

     Condensed Consolidated Statements of Operations
       For the Three Months Ended March 31, 2005 and 2004 (Unaudited).....................................        4

     Condensed Consolidated Statements of Cash Flows
       For the Three Months Ended March 31, 2005 and 2004 (Unaudited).....................................        5

     Notes to Condensed Consolidated Financial Statements (Unaudited) ....................................        6

     Item 2

     Management's Discussion and Analysis or Plan of Operations ..........................................        14

     Item 3

     Controls and Procedures..............................................................................        17

PART II - OTHER INFORMATION

     Item 1. Legal Proceedings ...........................................................................        19

     Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..................................        19

     Item 3. Defaults Upon Senior Securities .............................................................        19

     Item 4.  Submission of Matters to a Vote of Security Holders ........................................        19

     Item 5. Other Information ...........................................................................        19

     Item 6. Exhibits.....................................................................................        19

     Signatures ..........................................................................................        20


CERTIFICATIONS ...........................................................................................        21
</TABLE>
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                   AS OF MARCH 31, 2005 AND DECEMBER 31, 2004
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                   March 31,           December 31,
                                                                                      2005                 2004
                                                                              --------------------- --------------------
                                                                                  (Unaudited)            (Audited)
<S>                                                                           <C>                   <C>
ASSETS
Current assets
  Cash and cash equivalents                                                   $             594     $             306
  Accounts receivable, net of allowance for doubtful accounts of
   $2 in 2005 and 2004                                                                    1,298                 1,871
  Prepaid expenses and other current assets                                                 233                   262
                                                                              -----------------     -----------------
       Total current assets                                                               2,125                 2,439

Property and equipment, net                                                                 531                   577
Other assets                                                                                312                   285
                                                                              -----------------     -----------------
         TOTAL ASSETS                                                         $           2,968     $           3,301
                                                                              =================     =================
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities
  Accounts payable and accrued expenses                                       $           2,044     $           2,086
  Short-term revolving loans                                                                714                 1,012
  Notes payable, net of discount                                                            492                    --
  Dividends payable, current                                                              1,248                   376
  Current portion of long-term debt                                                         764                   782
  Deferred revenue                                                                          176                   623
  Liabilities from discontinued operations                                                  103                   112
                                                                              -----------------     -----------------
       Total current liabilities                                                          5,541                 4,991

Long term debt, net of current portion                                                      101                   125
Dividends payable, net of current portion                                                     4                   722
                                                                              -----------------     -----------------
       Total liabilities                                                                  5,646                 5,838
                                                                              -----------------     -----------------
Commitments and contingencies

Shareholders' deficiency
  Preferred stock, $0.0001 par value; 2,000,000 shares authorized;
     Series A Convertible Preferred, 134,680 issued and outstanding
     in 2005 and 2004; liquidation preference of $2,750,000 in 2005 and
     2004                                                                                      -                     -
     Series B Redeemable Preferred, 974 shares issued and outstanding
     in 2005 and 2004; liquidation preference of $974,075 in 2005 and 2004                     -                     -
     Series C Redeemable Preferred, 2,000 shares issued and outstanding
     in 2005 and 2004; liquidation preference of $2,000,000 in 2005 and 2004
     Series D Redeemable Preferred, 100 shares issued and outstanding
     in 2005 and 2004; liquidation preference of $100,000 in 2005 and 2004
  Common stock, $0.0001 par value; 50,000,000
     shares authorized in 2005 and 2004;
     4,556,912 and 4,547,013 shares issued in 2005 and 2004,
     respectively; and 4,516,985 and 4,507,086 shares outstanding
     in 2005 and 2004, respectively                                                           -                     -
  Additional paid-in capital                                                            112,760               112,484
  Unearned compensation                                                                     (28)                  (50)
  Accumulated deficit                                                                  (115,082)             (114,643)
                                                                              -----------------     -----------------
                                                                                         (2,350)               (2,209)
  Common stock in treasury, at cost  - 24,371 shares                                       (328)                 (328)
                                                                              -----------------     -----------------
       Total shareholders' deficiency                                                    (2,678)               (2,537)

          TOTAL LIABILITIES AND SHAREHODERS' DEFICIENCY                       $           2,968     $           3,301
                                                                              =================     =================
</TABLE>
See notes to condensed consolidated financial statements.

                                       3
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004
                     (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                          Three Months Ended
                                                                                          ------------------
                                                                                               March 31,
                                                                                               ---------
                                                                                           2005             2004
                                                                                    ---------------- ----------------
   <S>                                                                              <C>              <C>

   Revenue from continuing operations                                               $       2,080    $       2,106
                                                                                    ---------------- ----------------
   Costs and expenses
     Operations, research and development                                                   1,013              918
     Sales and marketing                                                                      472              392
     General and administrative                                                               692              649
     Amortization and depreciation                                                            113              143
                                                                                    ---------------- ----------------
                                                                                            2,290            2,102
                                                                                    ---------------- ----------------

   Operating (loss) income                                                                    (210)              4

   Other expenses
     Interest expense, net                                                                     75               65
                                                                                    ---------------- ----------------

   Loss before provision for income taxes                                                    (285)             (61)

   Provision for income taxes                                                                  --                1
                                                                                    ---------------- ----------------
   Loss from continuing operations                                                            (285)            (62)
   Income from discontinued operations                                                         --              204
                                                                                    ---------------- ----------------

   Net (loss) income
                                                                                             (285)             142

   Preferred stock dividends                                                                 (154)            (128)
                                                                                    ---------------- ----------------

   Net (loss) income attributable to common shareholders                            $        (439)   $          14
                                                                                    ================ ================

   Basic and diluted (loss) income per share:
      Basic and diluted loss from continuing operations                             $       (0.10)   $       (0.05)
      Basic and diluted  income (loss) from discontinued operations                 $        0.00             0.05
                                                                                    ---------------- ----------------
      Basic and diluted (loss) income  per share                                    $       (0.10)   $        0.00
                                                                                    ================ ================
   Basic weighted average common shares outstanding                                         4,510            4,085
                                                                                    ================ ================


</TABLE>
See notes to condensed consolidated financial statements.

                                       4
<PAGE>

                               DIRECT INSITE CORP
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                          For the three months ended
                                                                                                   March 31,
                                                                                            2005              2004
                                                                                       -------------     -------------
<S>                                                                                     <C>               <C>
Cash flows from operating activities
 Loss from continuing operations                                                        $       (285)     $        (62)
 Adjustments to reconcile loss from continuing operations
  to net cash used in continuing operations:
   Amortization and depreciation:
     Property and equipment                                                                      112               143
     Other                                                                                         1                 1
    Common stock and options issued for services                                                  18                 4
    Unearned compensation                                                                         22                --

  Changes in operating assets and liabilities:
    Accounts receivable                                                                          573              (338)
    Prepaid expenses and other current assets                                                     29               (11)
    Other assets                                                                                 (28)               18
    Accounts payable and accrued expenses                                                        (42)             (280)
    Deferred revenue                                                                            (447)              (26)
                                                                                       -------------     -------------
       Net cash used in continuing operations                                                    (47)             (551)
                                                                                       -------------     -------------
  Income from discontinued operations                                                             --               204
  Change in:
    Assets and liabilities from discontinued operations                                           (9)             (326)
                                                                                       -------------     -------------
       Net cash used in discontinued operations                                                   (9)             (122)
                                                                                       -------------     -------------
       Net cash used in operating activities                                                     (56)             (673)
                                                                                       -------------     -------------
Cash flows from investing activities
 Expenditures for property and equipment                                                         (66)              (14)
                                                                                       -------------     -------------
       Net cash used in investing activities                                                     (66)              (14)
                                                                                       -------------     -------------
Cash flows from financing activities
 Proceeds from sales of preferred stock                                                           --               760
 (Repayments) advances from revolving loans, net                                                (298)               24
 Proceeds from short-term notes                                                                  750                --
 Repayments of long-term debt                                                                    (42)              (37)
                                                                                       -------------     -------------
       Net cash provided by financing activities                                                 410               747
                                                                                       -------------     -------------
Net increase in cash and cash equivalents                                                        288                60

Cash and cash equivalents - beginning of period                                                  306                75
                                                                                       -------------     -------------
Cash and cash equivalents - end of period                                              $         594     $         135
                                                                                       =============     =============

Non-cash investing and financing activities:

Debt discount on loans                                                                 $        258
Issuance of common shares and options to purchase                                      ============
common shares for services and fees                                                    $         12      $         150
                                                                                       =============     =============
</TABLE>

See notes to condensed consolidated financial statements.

                                       5
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004


1.   Interim Financial Information

     The  condensed  consolidated  balance  sheet as of March 31, 2005,  and the
     condensed  consolidated  statements  of  operations  and cash flows for the
     three month  periods  ended March 31, 2005 and 2004,  have been prepared by
     the Company and are not audited. These interim financial statements include
     all  adjustments   which   management   considers   necessary  for  a  fair
     presentation  of the financial  statements and consist of normal  recurring
     items.  The results of operations for the quarterly  period ended March 31,
     2005,  are not  necessarily  indicative of results that may be expected for
     any other interim period or for the full year.

     These unaudited condensed  consolidated financial statements should be read
     in conjunction with the consolidated financial statements and notes thereto
     for the year ended December 31, 2004 included in the Company's  Form-10KSB.
     The  accounting  policies  used  in  preparing  these  unaudited  condensed
     consolidated  financial  statements are consistent  with those described in
     the December 31, 2004 consolidated financial statements.


2.   The Company

     Direct Insite Corp. and subsidiaries (the "Company"),  primarily operate as
     an  application  service  provider  ("ASP"),  that  markets  an  integrated
     transaction based "fee for service" offering called Invoices On-Line (IOL),
     an  electronic  invoice   presentment  and  payment  (EIP&P)  service  that
     processes  high  volumes  of  transactional  data for  invoice  presentment
     purposes delivered via the Internet on a global basis.

     The Company also provides  additional  service offerings in the form of its
     patented dbExpress TM technology, a management information tool that allows
     users to visually  data mine large  volumes of  transactional  data via the
     Internet.  A complete  Internet  Customer Care tool set integrated with the
     EIP&P product set is also available.  The Company  operates fully redundant
     data  centers  located at its main  office in Bohemia,  N.Y.  and in an IBM
     co-location facility in Newark, NJ.

     Management's liquidity plans are discussed in Note 9. Also, as described in
     Note 8, the Company has two customers that accounted for  approximately 74%
     and 25% of the Company's revenue for the three month period ended March 31,
     2005 and one customer that accounted for 98% of revenue for the three month
     period ended March 31,2004.  Loss of either of these customers would have a
     material adverse effect on the Company.

     Stock Options and Similar Equity Instruments
     --------------------------------------------

     As permitted under SFAS No. 148, "Accounting for Stock-Based Compensation -
     Transition and  Disclosure",  which amended SFAS No. 123,  "Accounting  for
     Stock-Based  Compensation",  the  Company has elected to continue to follow
     the  intrinsic  value method in  accounting  for its  stock-based  employee
     compensation arrangements as defined by Accounting Principles Board Opinion
     ("APB") No. 25,  "Accounting  for Stock Issued to  Employees",  and related
     interpretations  including  FASB  Interpretation  No. 44,  "Accounting  for
     Certain Transactions  Involving Stock  Compensation",  an interpretation of
     APB No. 25. The following table  illustrates the effect on net loss and net
     loss per  share if the  Company  had  applied  the fair  value  recognition
     provisions  of  SFAS  No.  123 to  stock-based  employee  compensation  (in
     thousands, except per share data):

                                       6
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004


2.   The Company (continued)
<TABLE>
<CAPTION>
                                                                          Three Months Ended
                                                                               March 31,
                                                                       --------------------------
                                                                           2005          2004
                                                                       ------------ -------------
       <S>                                                             <C>          <C>
       Net (loss) income attributable to common shareholders
        As reported                                                    $      (439) $          14
        Less:  Stock-based employee compensation
         expense determined under fair value-based
         method for all awards                                                (156)           (45)
                                                                       ------------ -------------
       Pro forma                                                       $      (595) $         (31)
                                                                       ============ =============
       Basic and diluted net loss per share
        As reported                                                    $     (0.10) $        0.00
                                                                       ============ =============
        Pro forma                                                      $     (0.13) $       (0.01)
                                                                       ============ =============
</TABLE>


     The fair value of Company  common stock  options  granted to employees  are
     estimated on the date of grant using the Black-Scholes option-pricing model
     with the following  assumptions:  (1) expected  volatility of 71.9% in 2005
     and 68.1% in 2004, (2) risk-free  interest rates of 4.50% in 2005 and 4.00%
     in 2004  and (3)  expected  lives of 4.75  years in 2005 and 5.75  years in
     2004.

3.   Reclassifications

     Certain  reclassifications  have  been made to the  condensed  consolidated
     financial statements shown for the prior period in order to have it conform
     to the current period's classifications.

4.   Discontinued Operations

     In  2001,  the  Company  and  Platinum  Communications,  Inc.  ("Platinum")
     completed  a  merger  under  an  Agreement  and  Plan  of  Merger  ("Merger
     Agreement").  Under the  Merger  Agreement,  a newly  formed  wholly  owned
     subsidiary of the Company  acquired all of the outstanding  common stock of
     Platinum.  As a result of the lack of development of the Platinum  business
     and to focus the  Company's  resources  on its core  business,  in December
     2003, the Company decided to close the operations of Platinum. Accordingly,
     the results of operations  and the assets and  liabilities  of Platinum are
     presented as discontinued operations for both the current and prior period.
     The income is  reflected  as income  from  discontinued  operations  in the
     accompanying condensed consolidated statements of operations. The following
     table reflects the results of the  discontinued  operations of Platinum for
     the three month periods ended March 31, 2005 and 2004, respectively:
<TABLE>
<CAPTION>
                                                                2005               2004
                                                                     (In thousands)
          <S>                                                         <C>              <C>
          Other income - net                                          --               207
          Interest expense, net                                       --                (3)
                                                             -----------      -------------
               Income from discontinued operations           $        --      $        204
                                                             ===========      =============
</TABLE>

                                       7
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004


4.   Discontinued Operations (continued)

     At March 31, 2005,  liabilities of the  discontinued  operation  consist of
     loans and accounts payable of $103,000.

5.   Accounts Receivable and Revolving Loans

     The Company  has an Accounts  Receivable  Purchase  Agreement  with a Bank,
     whereby  the Company  from time to time may assign  some of their  accounts
     receivable to the Bank on a full  recourse  basis.  Upon  specific  invoice
     approval, an advance of 80% of the underlying receivable is provided to the
     Company.  The  remaining  balance  (20%),  less  an  administrative  fee of
     approximately  0.5% plus interest at the rate of 1-1/2% per month,  is paid
     to the  Company  once the  customer  has paid.  The  maximum  amount of all
     assigned receivables outstanding at any time shall not exceed $1.5 million.
     The initial term of the agreement was for one year, and continues until due
     notice  of  termination  is  given  at any  time  by  either  party  to the
     agreement.  At March 31,  2005,  the  Company  had  assigned  approximately
     $580,000  of  accounts  receivable  to the Bank and  received  advances  of
     $464,000.

     In May 2004,  the Company  entered into an Agreement with DIRI Rec Fund LLC
     (the "Rec Fund") whereby the Company may assign certain accounts receivable
     on a full recourse basis to the Rec Fund as security for advances  (loans).
     The Rec Fund was  established  solely to advance  funds to the Company upon
     the  assignment of  receivables.  The Rec Fund is  administered  by a third
     party trustee.  Certain  shareholders  of the Company and a Director of the
     Company,  are the principal investors in the Rec Fund. Under the Agreement,
     the Company  pays  interest at the rate of one (1) percent per month on the
     maximum  purchase  amount (as defined in the agreement) of the Rec Fund and
     pays the administrative costs of the Rec Fund which approximate $12,000 per
     year.  At March 31, 2005 the Rec Fund had a total  principal  available for
     assignment  of $250,000 and the Company had  outstanding  advances from the
     Rec  Fund  of  $250,000  resulting  in no  unused  availability  under  the
     agreement.

6.   Debt

     Notes payable
     -------------

     At March 31, 2005 notes payable  consist of the notes as described below of
     $750,000 less debt discount of $258,000.

     In March 2005,  the Company  entered into a Securities  Purchase  Agreement
     (the   "Agreement")   with  Sigma   Opportunity   Fund  LLC  ("Sigma")  and
     Metropolitan   Venture  Partners  II,  L.P.  ("MetVP"),   collectively  the
     "Buyers",  whereby the Buyers purchased Senior  Subordinated  Secured Notes
     (the "Note Purchase") in the aggregate  amount of $750,000.  The notes bear
     interest at the rate of five percent (5%) per year beginning June 28, 2005,
     and payable  quarterly in cash or common stock at the option of the Buyers.
     The Notes mature on the earlier to occur of (i)  September  29, 2006,  (ii)
     the date on which demand for payment of the loan payable to JPMorgan  Chase
     Bank is made,  and (iii)  commencing May 13, 2005, the due date of the loan
     payable to JPMorgan Chase Bank pursuant to the Grid Demand Promissory Note,
     dated as of June 27,  2003,  including  if due on demand and whether or not
     demand for payment is actually  made, as such due date may be extended.  In

                                       8
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004

6.   Debt (continued)

     connection  with the note  purchase  the Buyers  were  issued  warrants  to
     purchase  750,000  common shares of the Company.  The exercise price of the
     warrants is $0.90 per share of common stock  subject to  adjustment  on the
     occurrence  of  certain  events as  defined.  The  Company  recorded a debt
     discount of $258,000 for the value of the warrants.  Under the terms of the
     agreement,  not later than August 30, 2005, the Company is required to file
     with the  Securities and Exchange  Commission a  Registration  Statement to
     register a number of common  shares  equal to the maximum  number of shares
     that would be  issuable  to the Buyers in payment of  interest on the notes
     through the  maturity  date plus a number of common  shares  issuable  upon
     exercise  of  the  warrants.  Sigma  had  an  exclusive  right  to  lead  a
     Follow-on-Financing  for 45 days  following the closing and the Company has
     granted Sigma  additional  time. In the event that the  Follow-on-Financing
     does occur the exercise price of the warrants  issued in  conjunction  with
     the Note  Purchase  will be adjusted as agreed  between the Company and the
     buyers.  In  the  event  the  Follow-on-Financing  is not  consummated  the
     exercise price of the warrants shall be $0.01 per common share.

Long-term debt
--------------

Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
                                                                  March 31,          December 31,
                                                                    2005                 2004
                                                               -------------      ---------------
<S>                                                               <C>                 <C>
Lines of credit (a)                                               $     655           $      668
Capitalized lease obligations (b)                                       210                  239
                                                               -------------      ---------------
                                                                        865                  907
Less current portion                                                   (764)                (782)
                                                               -------------      ---------------
Long-term debt, net of current portion                            $     101           $      125
                                                               =============      ===============
<FN>


(a)  In June 2003, the Company  obtained a discretionary  Line of Credit ("LoC")
     in the amount of $500,000 from JP Morgan Private Bank ("JPMC").  The LoC is
     guaranteed by Tall Oaks Group, LLC, an affiliate of MetVP, and is repayable
     on the earlier of demand or June 30, 2005.  The LoC  permitted two forms of
     draw down; one based upon prime rate, the second based upon LIBOR.  In July
     2003,  the Company  elected to draw down  $500,000  applying  the terms and
     conditions  set forth for  LIBOR.  The  interest  rate is the JPMC  reserve
     adjusted LIBOR plus 2.30%.  As of March 31, 2005,  the applicable  interest
     rate was 4.93%.

     Also in 2003, the Company  obtained,  and fully drew upon, a second line of
     credit from Sterling  National Bank ("Sterling") in the amount of $250,000.
     The line is guaranteed by the Company's  CEO,  secured by the assets of the
     Company,  and carries an interest  rate of 7%.  Repayments  are  calculated
     monthly at 2.778% of the outstanding balance,  plus interest,  and continue
     until  the line is fully  paid.  At March  31,  2005,  the  Company  had an
     outstanding balance of approximately $155,000 under the line of credit.

(b)  The Company has  equipment  under  capital  lease  obligations  expiring at
     various times through 2008. The assets and liabilities under capital leases
     are  recorded  at the  lower of the  present  values of the  minimum  lease
     payments or the fair values of the assets.
</FN>
</TABLE>

                                       9
<PAGE>

                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004



7.   Shareholders' Deficiency

     Common Stock and Option Issuances
     ---------------------------------

     During  the  quarter  ended  March  31,  2005,  the  Company  issued  9,899
     unregistered  shares of common stock and options to purchase  60,000 shares
     of its common stock as follows:

     --   We issued  9,899  shares,  valued at  $12,000,  to an  employee  and a
          consultant for services;

     --   We  issued  60,000  options  to  purchase  common  stock  to  a  sales
          consultant. The options vest ratably over 3 years and have an exercise
          price of $1.50 per share.

     Subsequent to March 31, 2005, under the terms of the President's employment
     agreement,  the Company issued to the President 100,000 options to purchase
     common shares at an exercise  price of $0.50 per share and 100,000  options
     to purchase common shares at the market price on the date of the grant.

     Earnings Per Share
     ------------------

     The Company  displays  earnings per share in accordance  with SFAS No. 128,
     "Earnings Per Share".  SFAS No. 128 requires dual presentation of basic and
     diluted  earnings per share ("EPS").  Basic EPS includes no dilution and is
     computed by dividing net income (loss)  attributable to common shareholders
     by the weighted average number of common shares outstanding for the period.
     Diluted EPS includes the potential  dilution that could occur if securities
     or other  contracts to issue common stock were  exercised or converted into
     common stock. Outstanding stock options, warrants and other potential stock
     issuances  have not been  considered  in the  computation  of  diluted  EPS
     amounts since the effect of their inclusion would be antidilutive.

     Securities that could potentially dilute basic EPS in the future, that were
     not included in the  computation  of the diluted EPS because to do so would
     have been antidilutive for the periods presented,  consist of the following
     (in thousands):
<TABLE>
        <S>                                                                      <C>
        Options to purchase common stock                                         4,705
        Convertible preferred stock and warrants to acquire common stock         4,178
                                                                                ------

                Total potential common shares as of March 31, 2005               8,883
                                                                                ======
</TABLE>
8.   Products and Services

     The Company and its subsidiaries  currently operate in one business segment
     and provide two separate  products:  ASP  services  and custom  engineering
     services.
<TABLE>
<CAPTION>
                                                        Three Months Ended March 31,
                                                         2005                 2004
                                                ------------------- --------------------
          <S>                                           <C>                 <C>
          ASP IOL fees                                  $1,149              $  990
          ASP telecommunications fees                       14                 156
          Custom engineering fees                          917                 960
                                                        ------             -------
              Total Revenue                             $2,080              $2,106
                                                        ======              ======
</TABLE>

                                       10
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                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004


8.   Products and Services (continued)

     Major Customers
     ---------------

     For the  three  months  ended  March  31,  2005 the  Company  had two major
     customers  that  accounted  for  74.0%  and  24.5% of the  Company's  total
     revenue.  For the three months ended March 31, 2004 one of these  customers
     accounted  for  98.5% of total  revenue.  Accounts  receivable  from  these
     customers amounted to $1,270,000 at March 31, 2005.


9.   Management's Liquidity Plans

     In order to meet cash needs and to achieve  positive  operating  cash flows
     the Company has and will continue to take various actions and steps that we
     believe will enable us to attain these goals. These actions include:

          --   In March 2005 the  Company  closed a Bridge Loan  financing  with
               Sigma Capital Partners LLC and Metropolitan  Venture Partners II,
               L.P. and received proceeds of $750,000 less legal fees of $55,000
               (see Note 6). Sigma had an  exclusive  right to lead a follow-on-
               financing  for 45 days  following  the closing of the Bridge Loan
               and the Company has granted Sigma  additional  time.  The Company
               anticipates  that  this   follow-on-financing  will  provide  the
               working  capital to sustain  and  expand  the  operations  of the
               Company.

          --   The  Company  and  the  holders  of the  Series  A and  Series  B
               Preferred  stock  have  previously  agreed  to defer  payment  of
               dividends. The Company may seek to defer thess dividends further.

          --   The Company intends to raise  additional  capital through private
               equity offerings and borrowing. In 2004, the Company received net
               proceeds from the sale of Preferred Stock of $1,430,000.  Also in
               2004 the Company  entered  into an  agreement  with DIRI Rec Fund
               LLC, a corporation formed and funded to loan funds to the Company
               against  accounts  receivable,  and  received  advances  totaling
               $250,000  from Diri Rec Fund (see note 5).  Further,  the Company
               intends  to renew for a  minimum  of one year the  $500,000  loan
               scheduled to mature on June 30, 2005 and the  guarantors  of this
               loan have consented to this extension (see note 6).

          --   As  discussed  above in  December  2003 the  Company  closed  the
               operations of its Platinum  subsidiary.  Platinum had experienced
               losses and had  significant  cash needs.  This action has reduced
               operating costs approximately $1,700,000 on an annual basis.

          --   The  Company  continues  to strive to  increase  revenue  through
               offering  custom  engineering  services,  expanding and enhancing
               existing  product  offerings  such as IOL,  and  introducing  new
               product  offerings.  In  2004  the  Company  entered  into  a new
               agreement  to provide  IOL  services  to a Fortune  100  company.
               Revenue  from  this new  customer  accounted  for  24.5% of total
               revenue for the three months  ended March 31, 2005.  In the first
               quarter 2005,  the Company  added an  additional  customer as the
               result  of the  sale of a part  of the  business  of an  existing
               customer.  Management  anticipates  that  revenue  from these new
               customers  will  continue  to  increase  in 2005 and  beyond  and
               expects to further broaden the Company's customer base in 2005.

                                       11
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                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004


9.   Management's Liquidity Plans (continued)

          --   The Company continues to expand its marketing efforts in order to
               increase the customer base. In this regard,  in 2003, the Company
               became a business partner with IBM and through this  relationship
               will work with IBM to achieve sales to new customers. The Company
               will continue to pursue similar  channel  partner  opportunities.
               Also, in the fourth quarter 2004 the Company employed a new sales
               and marketing executive and engaged an independent sales agent to
               further expand our sales efforts.

     Management believes that these plans and new initiatives as discussed above
     will lead to  positive  cash  flows and  profitability.  While the  Company
     pursues these goals management also believes that the Company's  ability to
     raise  additional  capital  through equity and debt placements will provide
     sufficient cash to meet cash  requirements at least through March 31, 2006.
     There can be no assurance,  however, that the Company will achieve the cash
     flow and  profitability  goals,  or that the Company  will be able to raise
     additional  capital  sufficient to meet its operating expenses or implement
     its plan.  In such  event,  the  Company  may have to revise  its plans and
     significantly  reduce its operating  expenses,  which could have an adverse
     effect on revenue and operations in the short term.


10.  New Accounting Pronouncements

     In December 2004, the Financial  Accounting Standards Board ("FASB") issued
     SFAS  No.  123R,  "Share-Based  Payment."  SFAS  No.  123R  eliminates  the
     alternative to use APB No. 25's intrinsic  value method of accounting  that
     was provided in SFAS No 123 as  originally  issued.  SFAS No. 123R requires
     entities to recognize the cost of employee  services in exchange for awards
     of equity  instruments  based on the grant-date  fair value of those awards
     (with limited  exceptions).  That cost will be  recognized  over the period
     during  which the  employee  is required to provide the service in exchange
     for the award.  No compensation  cost is recognized for equity  instruments
     for which  employees  do not render the  requisite  service.  SFAS No. 123R
     requires  entities  to  initially  measure  the cost of  employee  services
     received in exchange  for an award of  liability  instruments  based on its
     current fair value; the fair value of the award will be re-measured at each
     reporting  date through the settlement  date.  Changes in fair value during
     the requisite  service period will be recognized as compensation  cost over
     that  period.  The grant  date fair value of  employee  share  options  and
     similar instruments will be estimated using option-pricing  models adjusted
     for the  unique  characteristics  of those  instruments.  SFAS No.  123R is
     effective  as of the  beginning  of the  Company's  fiscal  year  following
     December  15, 2005  (January 1, 2006).  The  adoption of SFAS No. 123R will
     have no  effect  on the  Company's  consolidated  cash  flows or  financial
     position  but will have an  adverse  effect on the  Company's  consolidated
     results of operations.

     In December 2004, the FASB issued FAS No. 153,  "Exchanges of  Non-monetary
     Assets, an amendment of APB Opinion No. 29." This Statement  eliminates the
     exception from fair value measurement for non-monetary exchanges of similar
     productive  assets in paragraph 21(b) of APB Opinion No. 29 and replaces it
     with an exception for exchanges that do not have commercial substance. This
     Statement specifies that a non-monetary  exchange has commercial  substance
     if the future cash flows of the entity are expected to change significantly
     as a result of the exchange. The provisions of this Statement are effective
     for  non-monetary  asset  exchanges  occurring in fiscal periods  beginning
     after June 15, 2005. The adoption of SFAS No. 153 is not expected to have a
     material  impact  on  the  Company's   consolidated   financial   position,
     liquidity, or results of operations.


                                       12
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                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004


10.  New Accounting Pronouncements (continued)

     In  April  2004,  the  EITF  issued  Statement  No.  03-06   "Participating
     Securities and the Two-Class Method Under FASB Statement No. 128,  Earnings
     Per Share"  ("EITF  03-06").  EITF 03-06  addresses  a number of  questions
     regarding  the  computation  of earnings per share by  companies  that have
     issued  securities other than common stock that  contractually  entitle the
     holder to  participate  in dividends and earnings of the company when,  and
     if, it declares  dividends  on its common  stock.  The issue also  provides
     further guidance in applying the two-class  method of calculating  earnings
     per share,  clarifying what constitutes a participating security and how to
     apply the  two-class  method of  computing  earnings  per share  once it is
     determined  that a security  is  participating,  including  how to allocate
     undistributed  earnings to such a  security.  EITF 03-06 is  effective  for
     fiscal  periods  beginning  after  March 31,  2004.  The  adoption  of this
     statement did not have any effect on the Company's calculation of EPS.

     In September  2004, the EITF issued  statement  EITF Issue No. 04-08,  "The
     Effect of  Contingently  Convertible  Debt on Diluted  Earnings  per Share"
     ("EITF 04-08").  Contingently  convertible  debt  instruments are generally
     convertible  into common  shares of an issuer  after the common stock price
     has exceeded a predetermined  threshold for a specified period of time (the
     "market price contingency").  EITF 04-08 requires that shares issuable upon
     conversion of contingently convertible debt be included in diluted earnings
     per share  computations  regardless of whether the market price contingency
     contained in the debt  instrument has been met. EITF 04-08 is effective for
     reporting  periods ending after December 15, 2004 and requires  restatement
     of prior periods to the extent  applicable.  The adoption of this statement
     did not have an effect on the Company's calculation of EPS.

                                       13
<PAGE>

                      DIRECT INSITE CORP. AND SUBSIDIARIES



Item 2 - Managements Discussion and Analysis or Plan of Operations

Forward looking statements

All statements  other than  statements of historical  fact included in this Form
10-QSB including, without limitation, statements under, "Management's Discussion
and Analysis of Financial  Condition  and Results of  Operations"  regarding the
Company's financial position,  business strategy and the plans and objectives of
management for future operations, are forward-looking  statements.  When used in
this Form 10-QSB, words such as "anticipate,"  "believe,"  "estimate," "expect,"
"intend"  and  similar  expressions,  as  they  relate  to  the  Company  or its
management, identify forward-looking statements. Such forward-looking statements
are based on the  beliefs of  management,  as well as  assumptions  made by, and
information  currently  available to, the Company's  management.  Actual results
could  differ  materially  from  those   contemplated  by  the   forward-looking
statements  as a  result  of  certain  factors  including  but not  limited  to,
fluctuations in future operating results, technological changes or difficulties,
management  of future  growth,  the risk of errors or failures in the  Company's
software products,  dependence on proprietary  technology,  competitive factors,
risks associated with potential  acquisitions,  the ability to recruit personnel
and the dependence on key personnel.  Such statements  reflect the current views
of  management  with respect to future events and are subject to these and other
risks,  uncertainties  and assumptions  relating to the  operations,  results of
operations, growth strategy and liquidity of the Company. All subsequent written
and oral  forward-  looking  statements  attributable  to the Company or persons
acting  on its  behalf  are  expressly  qualified  in  their  entirety  by  this
paragraph.

Overview

We primarily operate as an application  service provider  ("ASP"),  providing an
integrated  transaction based "fee for service" offering called Invoices On-Line
(IOL),  an  electronic  invoice  presentment  and payment  (EIP&P)  service that
processes high volumes of transactional  data for invoice  presentment  purposes
delivered via the Internet on a global basis on behalf of our customers.  IOL is
our  primary  offering  and it is a globally  delivered  service  that  provides
electronic invoice  presentation in the Americas,  Europe and Asia, including 28
different  countries  around  the  globe  and in  more  than  13  languages  and
currencies.  We currently  host several  million  invoices  that are  accessible
"on-line" via the Internet 24 hours per day,  seven days per week,  365 days per
year. IOL is a uniquely positioned service offering in the industry, the service
is designed to handle the complex  invoicing  found in today's  global  business
environment.  The  solution  allows  Global 1000  companies  to receive,  route,
approve  and pay  invoices  on- line in the  local  language  and  currency.  By
automating the traditional  paper-based  invoicing  process,  customers now have
easy and quick access to line-item billing information, reporting and analytics.
With the  enhanced  level of accuracy  provided  by IOL,  invoice  disputes  are
greatly reduced and overall customer satisfaction is substantially increased.

We also  provide  additional  service  offerings  in the  form  of our  patented
dbExpressTM  technology,  a  management  information  tool that allows  users to
visually  data mine large  volumes of  transactional  data via the  Internet.  A
complete  Internet  Customer Care tool set integrated with the EIP&P product set
is also  available.  We operate fully redundant data centers located at our main
office in Bohemia,  N.Y. and in Newark,  NJ. Our facility in New Jersey is space
leased at an  International  Business  Machines  ("IBM"),  e-  business  Hosting
Center. This co-location / redundancy feature enables us to offer virtually down
time free service.

This suite of services enables us to provide a comprehensive  Internet delivered
service from the raw  transaction  record  through all of the internal  workflow
management processes including an electronically delivered invoice with customer
analytics.  This comprehensive service offering provides back office operations,
reduces our  customers'  costs and  provides for  improved  customer  service by
providing the end customer  with easy access to all of the detailed  information
about their bill. We operate fully  redundant  data centers  located at our main
office in Bohemia,  N.Y. and in Newark,  NJ. Our facility in New Jersey is space
leased at an International Business Machines ("IBM"), e-business Hosting Center.
This  co-location / redundancy  feature  enables us to offer virtually down time
free service.

                                       14
<PAGE>

                      DIRECT INSITE CORP. AND SUBSIDIARIES


Currently, IBM, our largest customer,  representing approximately 74% and 98% of
our  revenue  for the  three  month  periods  ended  March  31,  2005 and  2004,
respectively,  utilizes  our suite of IOL  products  and services to allow their
customers from around the globe to receive,  analyze,  dispute and cost allocate
all of their invoice  related  information  in their local language and currency
via the  Internet  24  hours a day,  7 days a week,  365  days a year.  A second
Fortune 100 customer  accounted for 24.5% of total revenue for the first quarter
2005.

As  disclosed in Note 6 to the  accompanying  Condensed  Consolidated  Financial
Statements,  during the three months ended March 31, 2005, we received  proceeds
from the issuance of Senior Subordinated Secured Notes of $750,000 less expenses
of $55,000.

Results of operations

For  the  three  months  ended  March  31,  2005 we had a loss  from  continuing
operations of $285,000 compared to a loss from continuing  operations of $62,000
in the same period in 2004.  The  increase in the loss is  principally  due to a
small  decrease  in revenue  combined  with an increase  in  operating  costs as
discussed below. Net loss for the three months ended March 31, 2005 was $285,000
compared  to a net  income  of  $142,000  in 2004.  This  includes  income  from
discontinued  operations  of $204,000 in the three  months ended March 31, 2004.
This income is principally the result of recognizing  income related to deferred
revenue of $180,000  included in other income of the  discontinued  operation in
the first quarter of 2004.

For the three months ended March 31, 2005  revenue  from  continuing  operations
decreased $26,000 (1.2%) to $2,080,000 compared to revenue of $2,106,000 for the
same period in 2004.  This  decrease is primarily  the result an increase in our
core business, the ASP IOL services, of $159,000 (16.1%) offset by a decrease of
$142,000 in revenue from  telecommunications  services  and a small  decrease of
$43,000  in  engineering  services.   The  decrease  in  the  telecommunications
services, which accounted for less than 1% of total revenue in the first quarter
of 2005 compared to 7.4% for the same period in 2004, is the result of decreased
demand for such services.

Costs of operations,  research and  development  increased by $95,000 (10.3%) to
$1,013,000  for the three  months  ended  March 31,  2005  compared  to costs of
$918,000  for the  three  months  ended  March 31,  2004.  These  costs  consist
principally   of  salaries  and  related   expenses  for  software   developers,
programmers,  custom  engineers,  network  services,  and  quality  control  and
assurance.  Also included are network costs, costs of the production co-location
facility and other expenses  directly related to our custom  engineering and ASP
production  services.  The increase in costs is principally  due to increases in
personnel wages and benefit costs of $55,000,  an increase in professional  fees
of $19,000 and an increase in software purchases of $12,000. All other operating
expenses increased $9,000, net.

Sales and  marketing  costs were  $472,000  for the three months ended March 31,
2005,  an increase of $80,000 or 20.4%  compared to costs for the same period in
2004.   Professional  fees,  including  personnel  recruiting  costs,  increased
$29,000, and consulting fees increased $38,000,  while all other costs increased
by $13,000.  We intend to continue increasing our sales and marketing efforts to
achieve further growth in our IOL services.

General and  administrative  costs increased $43,000 or 6.6% to $692,000 for the
three  months  ended March 31, 2005  compared to costs of $649,000  for the same
period in 2004.  Salaries and related costs increased $74,000 principally due to
the restoration of salary reductions taken in 2004. Costs for directors meetings
increased by $32,000 and legal fees increased $11,000. Insurance costs decreased
$23,000  primarily due to rate  decreases,  while  professional  fees  decreased
$20,000. All other administrative costs decreased $31,000.

Depreciation and amortization expense decreased by $30,000 (21.0%) primarily due
to fully amortizing certain software costs and other computer equipment.

                                       15
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

Financial Condition and Liquidity

For the three  months  ended  March  31,  2005,  we had a loss  from  continuing
operations of $285,000 compared to a loss from continuing  operations of $62,000
for the same period in 2004. We used $47,000 in cash for  continuing  operations
in the first three  months of 2005  compared to $551,000  for the same period in
2004, an improvement of $504,000 or 91.5%. Cash used in discontinued  operations
was $9,000 for the three months ended March 31, 2005. We funded the shortfall in
cash from operations primarily through the new borrowing noted above.

Cash used in operations,  including cash used for discontinued  operations,  for
the three months ended March 31, 2005 was $56,000, consisting of the net loss of
$285,000,  reduced by non-cash expenses of $153,000,  including depreciation and
amortization  of  $113,000.  In addition  accounts  receivable  were  reduced by
$573,000,  offset by an  increase in  accounts  payable and accrued  expenses of
$42,000 and an increase in deferred revenue of $447,000.

Cash used in investing  activities  was $66,000 for the three months ended March
31,  2005,  compared to $14,000 for same  period in 2004.  This was  principally
expenditures for equipment.

Cash  provided by  financing  activities  totaled  $410,000 for the three months
ended March 31, 2005,  compared to $747,000 for the three months ended March 31,
2004.  As  noted  above,  we  received  proceeds  from a new loan  financing  of
$750,000. We also repaid $42,000 of long-term debt and capital lease obligations
in the first quarter of 2005. The balance outstanding under short term revolving
loans for receivables financing decreased by $298,000 in 2005.

Management's Liquidity and Financing Plans

In order to meet our cash needs and to achieve positive  operating cash flows we
have and will  continue to take  various  actions and steps that we believe will
enable us to attain these goals. These actions include:


     --   In March 2005 we closed a Bridge  Loan  financing  with Sigma  Capital
          Partners LLC and  Metropolitan  Venture Partners II, L.P. and received
          proceeds  of  $750,000  less legal fees of $55,000  (see Note 5 to the
          Condensed Consolidated  Financial Statements).  Sigma had an exclusive
          right to lead a follow-on-financing  for 45 days following the closing
          of the Bridge Loan and the Company has granted Sigma  additional time.
          We anticipate that this follow-  on-financing will provide the working
          capital to sustain and grow our operations.

     --   We intend to raise additional capital through private equity offerings
          and  borrowing.  In 2004,  we received net  proceeds  from the sale of
          Preferred  Stock  of  $1,430,000.  Also  in 2004  we  entered  into an
          agreement  with DIRI Rec Fund LLC, a corporation  formed and funded to
          loan funds to the Company against  accounts  receivable,  and received
          advances totaling $250,000 from Diri Rec Fund.  Further,  we intend to
          renew for a minimum of one year the $500,000 loan  scheduled to mature
          on June 30, 2005 and the  guarantors  of this loan have  consented  to
          this  extension  (see note 6 to the Condensed  Consolidated  Financial
          Statements).

     --   As discussed  above in December  2003 we closed the  operations of our
          Platinum   subsidiary.   Platinum  had  experienced   losses  and  had
          significant  cash  needs.  This  action has  reduced  operating  costs
          approximately $1,700,000 on an annual basis.

     --   We continue  to strive to increase  revenue  through  offering  custom
          engineering   services,   expanding  and  enhancing  existing  product
          offerings such as IOL, and introducing new product offerings.  In 2004

                                       16
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES


          we entered  into a new  agreement to provide IOL services to a Fortune
          100 company.  Revenue from this new  customer  accounted  for 24.5% of
          total  revenue for the three months ended March 31, 2005. In the first
          quarter  2005,  we added an  additional  customer as the result of the
          sale of a part of the business of an existing customer.  We anticipate
          that revenue  from these new  customers  will  continue to increase in
          2005 and beyond and we expect to further  broaden our customer base in
          2005.

     --   We continue to expand our  marketing  efforts in order to increase the
          customer base. In this regard,  in 2003, we became a business  partner
          with IBM and through this  relationship  will work with IBM to achieve
          sales to new  customers.  We will continue to pursue  similar  channel
          partner opportunities.  Also, in the fourth quarter 2004 we employed a
          new sales and  marketing  executive and engaged an  independent  sales
          agent to further expand our sales efforts.

We believe that these plans and new  initiatives as discussed above will lead to
positive  cash  flows and  profitability.  While we pursue  these  goals we also
believe that our ability to raise  additional  capital  through  equity and debt
placements  will  provide  sufficient  cash to meet cash  requirements  at least
through March 31, 2006. There can be no assurance, however, that we will achieve
the  cash  flow  and  profitability  goals,  or that  we  will be able to  raise
additional  capital  sufficient to meet our operating  expenses or implement our
plan. In such event,  we may have to revise our plans and  significantly  reduce
our  operating  expenses,  which  could  have an adverse  effect on revenue  and
operations in the short term.


Item 3 - Controls and Procedures

Disclosures Controls and Procedures
-----------------------------------

The Company maintains controls and procedures designed to ensure that it is able
to collect the  information  that is required to be  disclosed in the reports it
files with the SEC,  and to process,  summarize  and disclose  this  information
within the time period  specified in the rules of the SEC. The  Company's  Chief
Executive  and  Chief  Financial  Officers  are  responsible  for  establishing,
maintaining  and  enhancing  these  procedures.  They are also  responsible,  as
required  by the  rules  established  by the  SEC,  for  the  evaluation  of the
effectiveness of these procedures.

Based on their  evaluation of the Company's  disclosure  controls and procedures
which took place as of the date of filing of this  report,  the Chief  Executive
Officer and the Chief  Financial  Officer  believe  that, as is typical of small
companies,  these procedures were not effective as a result of limited resources
and a limited segregation of duties in accounting and financial reporting.

Internal Financial Controls
---------------------------

The  Company  maintains  a system  of  internal  controls  designed  to  provide
reasonable   assurance  that   transactions  are  executed  in  accordance  with
management's  general or specific  authorization;  transactions  are recorded as
necessary to (1) permit  preparation of financial  statements in conformity with
accepted  accounting  principles  generally  accepted  in the  United  States of
America,  and (2)  maintain  accountability  for  assets.  Access  to  assets is
permitted   only  in   accordance   with   management's   general  or   specific
authorization.

Since the date of the most recent evaluation of the Company's  internal controls
by the  Chief  Executive  and  Chief  Financial  Officers,  there  have  been no
significant  changes  in such  controls  or in other  factors  that  could  have
significantly  affected those  controls,  including any corrective  actions with
regard to significant deficiencies and material weaknesses.

                                       17
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                      DIRECT INSITE CORP. AND SUBSIDIARIES


Internal Controls over Financial Reporting
------------------------------------------

It is the  responsibility of the Company's  management to establish and maintain
adequate internal control over financial reporting.  However, due to its limited
financial  resources  typical  of  companies  its  size,  there is only  limited
segregation of duties within the accounting  function,  leaving most significant
aspects of financial  reporting in the hands of the CFO.  Based on the integrity
and  trustworthiness  of the Company's  chief  financial  officer,  the Board of
Directors  has had  confidence  that  there have been no  irregularities  in the
Company's financial reporting or in the protection of its assets.

Our independent auditors have reported to our Board of Directors certain matters
involving  internal  controls that our independent  auditors  considered to be a
reportable condition and a material weakness, under standards established by the
American Institute of Certified Public  Accountants.  The reportable  conditions
and material weakness relate to the financial close process, limited segregation
of duties and the absence of appropriate  reviews and approvals of  transactions
and  accounting  entries.   Given  these  reportable   conditions  and  material
weaknesses, management devoted additional resources to closing and preparing the
report for the quarter ended March 31, 2005. As a result,  we are confident that
our financial statements for the quarter ended March 31, 2005 fairly present, in
all material respects, our financial condition and results of operations.

                                       18
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                      DIRECT INSITE CORP. AND SUBSIDIARIES

                          PART II - OTHER INFORMATION

Item 1. Legal Proceedings

        None

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

        This information has  been previously provided on Form 8-K  dated  March
        29, 2005.

Item 3. Defaults Upon Senior Securities

        None

Item 4. Submission of Matters to a Vote of Security Holders

        None

Item 5. Other Information

        None

Item 6. Exhibits

     31   Certifications  pursuant  to Rules  13a-14(a)  as adopted  pursuant to
          Section 302 of the Sarbanes-Oxley Act of 2002.

     32   Certifications  pursuant to 18 U.S.C. Section 1350 as adopted pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002.


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<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

                                   SIGNATURES



Pursuant  to the  requirements  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.




DIRECT INSITE CORP.



/s/ James A. Cannavino
---------------------------------------
James A. Cannavino, Chief Executive Officer                   May 18, 2005



/s/ Michael J. Beecher
---------------------------------------
Michael J. Beecher, Chief Financial Officer                   May 18, 2005

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