UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q
                                   (Mark One)

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

                For the quarterly period ended September 30, 2009

                                       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 registrant as specified in its charter)

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

13450 West Sunrise Boulevard, Suite 510, Sunrise, FL           33323
(Address of principal executive offices)                    (Zip Code)

        Registrant's telephone number, including area code (631) 873-2900

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 [  ]

Indicate by check mark whether the registrant has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be submitted  and posted  pursuant to Rule 405 of  Regulation  S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).

                        Yes [  ]         No [  ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated filer, a non-accelerated  filer, or a smaller reporting company. See
the definitions of "large accelerated filer",  "accelerated filer", and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

     Large accelerated filer [ ]              Accelerated filer [  ]
     Non-accelerated filer [ ]                Smaller reporting company [X]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).   Yes [  ]   No [ X ]

The number of shares of $.0001 par value stock  outstanding  as of November  10,
2009 was: 11,112,514.
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION                                                                               Page

     Item 1. Financial Statements.
<S>  <C>                                                                                                    <C>
     Condensed Consolidated Balance Sheets as of September 30, 2009 (Unaudited) and
       December 31, 2008 .................................................................................     3
     Condensed Consolidated Statements of Income
       For the Three and Nine Months Ended September 30, 2009 and 2008 (Unaudited)........................     4

     Condensed Consolidated Statements of Cash Flows
       For the Nine Months Ended September 30, 2009 and 2008 (Unaudited)..................................     5

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

     Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .......    15

     Item 3. Quantitative and Qualitative Disclosure About Market Risk....................................    20

     Item 4T. Controls and Procedures.....................................................................    20

PART II - OTHER INFORMATION

     Item 6. Exhibits.....................................................................................    21

     Signatures ..........................................................................................    22

CERTIFICATIONS                                                                                              Exhibits
</TABLE>
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                 AS OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                  September 30,         December 31,
                                                                                      2009                 2008
                                                                              --------------------- --------------------
                                                                                   (Unaudited)
ASSETS
Current assets
<S>                                                                            <C>                  <C>
  Cash and cash equivalents                                                    $          2,243     $            980
  Accounts receivable, net of allowance for doubtful accounts of
   $0 in 2009 and 2008                                                                    1,686                1,951
  Prepaid expenses and other current assets                                                  95                  162
                                                                              --------------------- --------------------

       Total current assets                                                               4,024                3,093

Property and equipment, net                                                                 471                  649
Deferred tax asset                                                                        2,867                2,867
Other assets                                                                                280                  271
                                                                              --------------------- --------------------
         TOTAL ASSETS                                                          $          7,642      $         6,880
                                                                              ===================== ====================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Accounts payable and accrued expenses                                        $         1,509       $         1,802
  Current portion of capital lease obligations                                               5                     6
  Current portion of notes payable                                                         190                   172
  Warrant liability                                                                        305                    --
  Dividends payable                                                                         50                   124
  Deferred revenue                                                                         182                    75
                                                                              --------------------- --------------------

       Total current liabilities                                                         2,241                 2,179

Capital lease obligations, net of current portion                                            2                     7
Notes payable, net of current portion                                                      183                   274
                                                                              --------------------- --------------------

       Total liabilities                                                                 2,426                 2,460
                                                                              --------------------- --------------------


Series C Redeemable Preferred stock, 2,000 shares issued and
outstanding in 2009 and 2008; liquidation preference of $2,000,000
                                                                                         2,000                    -


Commitments and contingencies

Shareholders' equity
  Preferred stock, $0.0001 par value; 2,000,000 shares authorized;
    Series B Redeemable Preferred, 0 shares outstanding in 2009 and 974
    shares issued and outstanding in  2008, liquidation preference of                       -                     -
    $974,000 at December 31, 2008;
    Series D Redeemable Preferred, 100 shares issued and outstanding                        -                     -
    in 2009 and 2008; liquidation preference of $100,000.
  Common stock, $0.0001 par value; 50,000,000 shares authorized;
  10,987,305 and 10,311,968 shares issued in 2009 and 2008,
  respectively; and 10,947,378 and 10,272,041 shares outstanding in 2009                     1                     1
  and 2008, respectively
  Additional paid-in capital                                                           114,474               116,862
  Accumulated deficit                                                                 (110,931)             (112,115)
                                                                              --------------------- --------------------
                                                                                         3,544                 4,748

  Common stock in treasury, at cost  - 24,371 shares                                      (328)                 (328)
                                                                              --------------------- --------------------
       Total shareholders' equity                                                        3,216                 4,420
                                                                              --------------------- --------------------

          TOTAL LIABILITIES AND SHAREHODERS' EQUITY                           $          7,642       $         6,880
                                                                              ===================== ====================
</TABLE>
See notes to condensed consolidated financial statements.

                                       3
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 and 2008
                      (in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                        Three Months Ended                   Nine Months Ended
                                                                        ------------------                   -----------------
                                                                           September 30,                       September 30,
                                                                           -------------                       -------------
                                                                      2009               2008              2009             2008
                                                              ------------------ ----------------- ----------------- ---------------
<S>                                                           <C>                <C>               <C>               <C>
Revenue                                                       $          2,474   $         2,509   $         7,648   $       6,810
                                                              ------------------ ----------------- ----------------- ---------------
Costs and expenses
  Operations, research and development                                     862               984             2,735           2,816
  Sales and marketing                                                      364               273             1,061             692
  General and administrative                                               567               747             1,947           2,197
  Depreciation and amortization                                             87                74               277             227
                                                              ------------------ ----------------- ----------------- ---------------
                                                                         1,880             2,078             6,020           5,932
                                                              ------------------ ----------------- ----------------- ---------------
Operating income                                                           594               431             1,628             878

Other (income) expense
  Change in fair value of warrant liability                                101                --               158              --
  Other income, net                                                         (1)               (1)               (1)             (1)
  Interest expense, net                                                      6                --                19              11
                                                              ------------------ ----------------- ----------------- ---------------
Income  before provision for (benefit from) income tax                     488               432             1,452             868

Provision for (benefit from) income taxes                                   23                14                55          (2,853)
                                                              ------------------ ----------------- ----------------- ---------------
Net income                                                                 465               418             1,397           3,721

Preferred stock dividends                                                  (50)             (161)             (208)           (536)
                                                              ------------------ ----------------- ----------------- ---------------
Net income  attributable to common shareholders               $            415   $           257   $         1,189   $       3,185
                                                              ================== ================= ================= ===============
Basic  income  per share attributable
 to common shareholders                                       $           0.04   $          0.03   $          0.11   $        0.43
                                                              ================== ================= ================= ===============
Diluted income  per share attributable
 to common shareholders                                       $           0.04   $          0.03   $          0.11   $        0.31
                                                              ================== ================= ================= ===============
Basic weighted average common shares outstanding                        10,878             7,903            10,783           7,482
                                                              ================== ================= ================= ===============
Diluted weighted average common shares outstanding                      11,300             9,553            11,137          10,871
                                                              ================== ================= ================= ===============
</TABLE>
See notes to condensed consolidated financial statements.

                                       4
<PAGE>
                               DIRECT INSITE CORP
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                         For the Nine Months Ended
                                                                                         -------------------------
                                                                                                September 30,
                                                                                                -------------
                                                                                            2009              2008
                                                                                     ----------------- -----------------
Cash flows from operating activities
<S>                                                                                  <C>               <C>
 Net income                                                                          $         1,397   $         3,721

 Adjustments to reconcile net income
  to net cash provided by operations:
    Amortization and depreciation                                                                277               226
    Deferred taxes                                                                                --            (2,867)
    Stock based compensation expense                                                             430               481
    Change in fair value of warrant liability                                                    158                --

  Changes in operating assets and liabilities:
    Accounts receivable                                                                          265               (92)
    Prepaid expenses and other assets                                                             57                50
    Accounts payable and accrued expenses                                                        (96)              (81)
    Deferred revenue                                                                             107                57
                                                                                     ----------------- -----------------
       Net cash provided by operations                                                         2,595             1,495
                                                                                     ----------------- -----------------
Cash flows used in investing activities:
    Expenditures for property and equipment                                                      (43)             (198)
                                                                                     ----------------- -----------------
Cash flows from financing activities:
    Redemption of preferred stock                                                               (974)               --
    Payment of dividends on preferred stock                                                     (282)           (2,922)
    Proceeds from issuance of shares on exercise of options and warrants                         100               618
    Principal payments on capital lease obligations                                               (5)              (34)
    Repayments of long-term debt                                                                (128)              (89)
                                                                                     ----------------- -----------------
       Net cash used in financing activities                                                  (1,289)           (2,427)
                                                                                     ----------------- -----------------
Net increase (decrease)  in cash and cash equivalents                                          1,263            (1,130)

Cash and cash equivalents - beginning of period                                                  980             2,184
                                                                                     ----------------- -----------------
Cash and cash equivalents - end of period                                            $         2,243   $         1,054
                                                                                     ================= =================
Supplemental Disclosures:

Cash paid for interest                                                               $            44   $            38
                                                                                     ================= =================
Cash paid for income taxes                                                           $            14   $            30
                                                                                     ================= =================
Non-cash investing and financing activities:
  Reduction in accrued liabilities through issuance of debt                          $            --   $            62
                                                                                     ================= =================
  Acquisition of equipment through issuance of debt                                  $            55   $           295
                                                                                     ================= =================
  Dividends accrued and unpaid                                                       $            50   $           536
                                                                                     ================= =================
  Reduction in accrued liabilities through issuance of common stock                  $           198   $            67
                                                                                     ================= =================
  Derivative liability on adoption of ASC Sub Topic 815 - 40,
 "Contracts in Entity's Own Stock"                                                   $           147   $            --
                                                                                     ================= =================
</TABLE>
See notes to condensed consolidated financial statements.

                                       5
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


1.   Interim Financial Information

     The  accompanying   unaudited  condensed   consolidated  interim  financial
     statements include the accounts of Direct Insite Corp. and its subsidiaries
     ("Direct  Insite"  or  the  "Company").   All  intercompany   balances  and
     transactions   have  been  eliminated  in   consolidation.   The  condensed
     consolidated  balance  sheet as of September  30, 2009,  and the  condensed
     consolidated  statements  of income  and cash  flows for the three and nine
     months ended September 30, 2009 and 2008, have been prepared by the Company
     and  are not  audited.  These  unaudited,  condensed  consolidated  interim
     financial  statements  have been  prepared in  accordance  with  accounting
     principles  generally  accepted in the United States of America for interim
     financial information and with the instructions to Form 10-Q.  Accordingly,
     they do not  include  all of the  information  and  footnotes  required  by
     accounting  principles  generally  accepted in the United States of America
     ("GAAP") for complete financial statements.  In addition,  the December 31,
     2008 balance sheet data was derived from the audited consolidated financial
     statements,  but does not include all disclosures  required by GAAP.  These
     interim condensed consolidated 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 three and nine months ended  September 30, 2009, 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 audited consolidated financial statements and notes
     thereto  for the year ended  December  31, 2008  included in the  Company's
     Form-10K.  The  accounting  policies  used  in  preparing  these  unaudited
     condensed  consolidated  financial  statements  are  consistent  with those
     described  in  the  audited  December  31,  2008   consolidated   financial
     statements.

     Use of Estimates
     ----------------

     In preparing financial statements in conformity with accounting  principles
     generally  accepted  in the  United  States of  America,  management  makes
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities  and  disclosures of contingent  assets and  liabilities at the
     date of the condensed  consolidated  financial  statements,  as well as the
     reported  amounts of revenue  and  expenses  during the  reporting  period.
     Management  bases its  estimates on  historical  experience  and on various
     assumptions that are believed to be reasonable under the circumstances, the
     results  of which form the basis for making  judgments  about the  carrying
     values of assets and liabilities  that are not readily  apparent from other
     sources.  Disclosures that are particularly sensitive to estimation include
     revenue  recognition,  stock based compensation,  fair value of the warrant
     liability,and  the  valuation  allowance  on deferred  tax  assets.  Actual
     results could differ from those estimates.

2.   The Company

     Direct Insite Corp.  was organized as a public  company,  under the laws of
     the State of  Delaware  on August 27,  1987.  Direct  Insite  operates as a
     Software as a Service provider ("SaaS"),  providing best practice financial
     supply chain automation and workflow efficiencies within the Procure-to-Pay
     (PTP) and  Order-to-Cash  (OTC) processes.  The Company's global Electronic
     Invoice Presentment and Payment ("EIP&P") services automate manual business
     processes such as complex  billing,  invoice  validation,  invoice-to-order
     matching, consolidation, dispute handling, and payment processing.

     As described in Note 9, the Company has three  customers that accounted for
     approximately  95.1% and 97.0% of the Company's revenue for the nine months
     ended September 30, 2009 and 2008,  respectively.  Loss of IBM or EDS would
     have a material adverse effect on the Company.

                                       6
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


3.   Change in Accounting Principle

     Effective  January  1, 2009,  the  Company,  adopted  the  guidance  in the
     Financial   Accounting   Standards  Board  ("FASB")  Accounting   Standards
     Codification  ("ASC") Sub Topic 815-40,  "Contracts in Entity's Own Stock",
     determined  that a warrant  issued in  conjunction  with the guarantee of a
     credit facility  contained a provision  whereby the exercise price could be
     adjusted  upon certain  financing  transactions  at a lower price per share
     could no longer be viewed as  indexed to the  Company's  common  stock.  As
     such,   the  Company   changed  the   accounting  for  this  warrant  to  a
     "derivative". As a result the Company recorded the warrant liability at the
     fair  value  of  the  warrant  of  $147,000  as  of  January  1,  2009  and
     reclassified its issuance date fair value from additional  paid-in-capital.
     The cumulative effect of the change in accounting principle is as follows:
<TABLE>
<CAPTION>
      ---------------------------------------------------------- ----------------------------- ----------------------
                                                                  Additional Paid In Capital    Accumulated Deficit
      ---------------------------------------------------------- ----------------------------- ----------------------
                                                                                    ($ in thousands)
      ---------------------------------------------------------- ----------------------------------------------------
      <S>                                                                 <C>                       <C>
      Balance December 31, 2008                                           $116,862                  ($112,115)
      ---------------------------------------------------------- ----------------------------- ----------------------
        Cumulative effect of change in accounting principle                   (141)                        (5)
                                                                 ----------------------------- ----------------------
      ---------------------------------------------------------- ----------------------------- ----------------------
      Balance January 1, 2009                                             $116,721                  ($112,120)
                                                                 ========================      ===================
      ---------------------------------------------------------- ----------------------------- ----------------------
</TABLE>
4.   Stock Based Compensation

     Stock Options
     -------------

     The Company accounts for share-based awards exchanged for employee services
     in  accordance  with  accounting   standards  as  set  forth  in  ASC  718,
     "Compensation-Stock  Compensation".  As a  result,  for the  three and nine
     month periods ended September 30, 2009 the Company  recorded $0 and $9,000,
     respectively,  in compensation  expense for the fair value of options.  For
     the three and nine month  periods  ended  September  30,  2008 the  Company
     recorded $14,000 and $78,000, respectively, in compensation expense for the
     fair value of options.  At September  30, 2009,  there was no  unrecognized
     compensation costs related to stock options granted.

     Nonqualified  and  incentive  stock options have been granted to directors,
     officers and employees of the Company under our Stock Option Plans. Options
     generally  vest over 3 years and  expire  five  years  from the date of the
     grant. At September 30, 2009, 3,396,329 shares were authorized for issuance
     under the stock option plans.  Awards that expire or are cancelled  without
     delivery of shares generally become available for issuance under the plans.
     The Company issues new shares to satisfy stock option exercises. There were
     no options granted during the nine months ended September 30, 2009.  During
     the nine months ended  September 30, 2008 the Company issued 75,000 options
     with a weighted average grant date fair value of $69,000. The fair value of
     the stock options  granted was estimated on the date of the grant using the
     Black-Scholes option pricing model (see Note 8).

     A summary  of option  activity  under the plans for the nine  months  ended
     September 30, 2009 is as follows:
<TABLE>
<CAPTION>
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
                                                                                 Weighted Average
                                                                                    Remaining         Aggregate Intrinsic
                                               Shares       Weighted Average        Contractual             Value
                                           (in thousands)    Exercise Price       Term (in years)       (in thousands)
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
   <S>                                         <C>                <C>                    <C>                  <C>
   Balance,January 1, 2009                     1,277              $0.62
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Granted                                    --                 --
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Exercised                                (100)             $0.45
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Canceled                                   --                 --
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Forfeited                                 (47)             $1.66
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
   Balance, September 30, 2009                 1,130              $0.59                  2.0                  $555
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
   Exercisable, September 30, 2009             1,130              $0.59                  2.0                  $555
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
                                       7
</TABLE>
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

4.   Stock Based Compensation (continued)

     The total  fair  value of  options  vested  during  the nine  months  ended
     September 30, 2009 and 2008 was $35,000 and $63,000, respectively.

     Restricted Stock Grants
     -----------------------

     During the nine months ended  September 30, 2009 the Company granted 44,544
     shares to directors as part of their  compensation.  The stock grants had a
     fair value of $49,000  based on the closing  price of the stock on the date
     of the grant.  The stock  grants vest over the two year  period  January 1,
     2009 through December 31, 2010.

     A summary  of the  status of the  Company's  restricted  non-vested  shares
     issued  pursuant to employment  and service  agreements as of September 30,
     2009 and  changes  during  the nine  months  ended  September  30,  2009 is
     presented below:
<TABLE>
<CAPTION>
------------------------------------------ ---------------------------------- ------------------------------------------------

              Non-vested Shares                    Shares (in thousands)             Weighted-average Grant Date Fair Value
------------------------------------------ ---------------------------------- ------------------------------------------------
<S>                                                       <C>                                        <C>
Non-vested at January 1, 2009                             521                                        $2.21
------------------------------------------ ---------------------------------- ------------------------------------------------
Granted                                                    45                                        $1.09
------------------------------------------ ---------------------------------- ------------------------------------------------
Vested                                                   (228)                                       $2.10
------------------------------------------ ---------------------------------- ------------------------------------------------
Forfeited                                                  --                                           --
                                           -------------------------------------
------------------------------------------ ---------------------------------- ------------------------------------------------
Non-vested at September 30, 2009                          338                                        $2.14
                                           =====================================
------------------------------------------ ---------------------------------- ------------------------------------------------
</TABLE>
     For the three months ended  September 30, 2009 and 2008 stock  compensation
     expense for stock grants was $140,000 and $134,000,  respectively.  For the
     nine months ended  September 30, 2009 and 2008 stock  compensation  expense
     for stock grants was $421,000 and $403,000,  respectively. At September 30,
     2009, the future  expected  expense for  non-vested  shares is $631,000 and
     will be recognized on a straight-line basis over the period October 1, 2009
     through December 31, 2010.

5.   Fair Value of Financial Instruments

     ASC 820, "Fair Value  Measurements  and Disclosures"  ("ASC 820"),  defines
     fair value,  establishes a framework for measuring fair value in accordance
     with generally  accepted  accounting  principles,  and expands  disclosures
     about  the  price  that  would be  received  to sell an  asset,  or paid to
     transfer a liability in an orderly  transaction between market participants
     at the measurement date. ASC 820 applies to all assets and liabilities that
     are measured and reported on a fair value basis.

     ASC 820 establishes a three-tier fair value hierarchy which prioritizes the
     inputs used in measuring fair value as follows:

     Level 1-Observable inputs such as quoted prices in active markets;
     Level 2-Inputs, other than the quoted prices in active markets,  that are
             observable either directly or indirectly;
     Level 3-Unobservable  inputs in which there is little or no  market data,
             which require the  reporting entity to develop its own assumptions.

       The following are the Company's major categories of liabilities measured
       at fair value on a recurring basis at September 30, 2009, categorized by
       the fair value hierarchy:

                                       8
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

5.   Fair Value of Financial Instruments (continued)

          Fair Value  Measurements  at  September  30,  2009  Using  Significant
          ----------------------------------------------------------------------
          Unobservable Inputs:
          -------------------
<TABLE>
<CAPTION>
          Description                                   (Level 3)
   ----------------------------------------------    -----------------
          Liabilities:
          <S>                                        <C>
              Warrant liability                      $     305
                                                     =================
</TABLE>
     The following is a reconciliation  of the beginning and ending balances for
     the Company's liabilities measured at fair value on a recurring basis using
     significant  unobservable  inputs (Level 3) and a summary of the derivative
     warrant liability during the nine months ended September 30, 2009:
<TABLE>
<CAPTION>
       Fair Value Measurements Using Significant Unobservable Inputs (Level 3):
       -------------------------------------------------------------------------
                                 Description                                 (Level 3)
   -----------------------------------------------------------------     -----------------
          Liabilities:
          <S>                                                                 <C>
             Balance at January 1, 2009                                       $   --

             Cumulative effect of the change in accounting
          principle, January 1, 2009
                                                                                 147

             Change in fair value included in operations                         158
                                                                         -----------------
              Balance, September 30, 2009                                     $  305
                                                                         =================
</TABLE>
     The change in fair value  recorded for Level 3 liabilities  for the periods
     above are reported in other income (expense) on the condensed  consolidated
     statement of operations.

6.   Warrant Liability

     The Company  accounts for certain  warrants as a derivative  liability (see
     Note 3.) using the fair value method at the end of each  quarter,  with the
     resultant gain or loss recognition  recorded against earnings.  The Company
     recognized a total non-cash expense of approximately  $101,000 and $158,000
     for the three and nine months ended September 30, 2009,  respectively,  for
     these derivative  warrants.  The fair value of the derivative  warrants was
     determined using the Black -Scholes valuation model using the closing price
     stock price of $1.05, a volatility  rate of 178%, a risk free interest rate
     of 0.4% and a contractual life of 0.78 years.

7.   Debt

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

     At  September  30, 2009 and December 31,  2008,  notes  payable  consist of
     $373,000 and  $446,000,  respectively,  of  borrowings  for the purchase of
     equipment.  These notes bear  interest at rates  ranging from 8.8% to 10.3%
     per year and mature through August 2012.  The notes are  collateralized  by
     the equipment  purchased with net book values of $283,000 and $396,000,  at
     September 30, 2009 and December 31, 2008, respectively.

     Capitalized lease obligations
     -----------------------------

     The Company has  equipment  under a capital  lease  obligation  expiring in
     2011. 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. The interest rate pertaining to this capital lease is
     15.3%.

                                       9
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

7.   Debt (continued)

     At September 30, 2009,  the gross and net book value of the related  assets
     is approximately  $14,000 and $6,000,  respectively.  At December 31, 2008,
     the  gross  and net book  value of the  related  assets  was  approximately
     $38,000 and $18,000, respectively.

8.   Shareholders' Equity

     The following table summarizes the changes in shareholders'  equity for the
     nine months ended September 30, 2009:
<TABLE>
<CAPTION>
                     --------------------------------------------------- -------------------
                                                                                   In
                                                                                thousands
                     --------------------------------------------------- -------------------
                            <S>                                                <C>
                            Balance, December 31, 2008                          $   4,420
                     --------------------------------------------------- -------------------
                            Cumulative  effect of change in  accounting
                            principle                                                (147)
                     --------------------------------------------------- -------------------
                            Balance - January 1, 2009                           $   4,273
                     --------------------------------------------------- -------------------
                               Dividends accrued                                     (208)
                     --------------------------------------------------- -------------------
                               Stock based compensation                               430
                     --------------------------------------------------- -------------------
                               Shares issued for settlement of
                               accrued liabilities                                    198
                     --------------------------------------------------- -------------------
                               Proceeds on exercise of warrants                       100
                     --------------------------------------------------- -------------------
                               Redemption of preferred stock                         (974)
                     --------------------------------------------------- -------------------
                               Reclassification of Series C
                               Redeemable Preferred Stock                          (2,000)
                     --------------------------------------------------- -------------------
                               Net income                                           1,397
                                                                                ----------
                     --------------------------------------------------- -------------------
                            Balance - September 30, 2009                           $3,216
                     --------------------------------------------------- -------------------
</TABLE>
     Common Stock and Option Issuances
     ---------------------------------

     During the nine months ended  September 30, 2009 the Company issued 270,000
     restricted common shares with a fair value of $596,000 based on the closing
     share price on the date of the grant to certain  officers under  employment
     agreements. The Company also issued 319,050 restricted common shares valued
     at $198,000 to directors in  settlement  of directors  fees accrued in 2006
     and 2007. The Company also issued 95,648 shares on exercise of warrants and
     received proceeds of $100,000.  Also during the nine months ended September
     30,  2009 the  Company  issued  58,139  shares on the  exercise  of 100,000
     options on a cashless basis.

     During the nine months ended  September 30, 2008 the Company issued 147,500
     restricted common shares with a fair value of $303,000 based on the closing
     share price on the date of the grant to certain  officers under  employment
     agreements.  The Company also issued 1,552 restricted  common shares valued
     at $3,000 to a former employee for services in 2007, and 72,275  restricted
     common  shares with a fair value of $65,000 to an employee in settlement of
     compensation  accrued in 2007 and compensation  earned in 2008.  During the
     nine months ended September 30, 2008 the Company also issued 141,898 common
     shares on the  exercise of 440,000  stock  options on a cashless  basis and
     360,000  shares on exercise of options  for cash of  $418,000.  The Company
     also issued 213,950 shares on exercise of warrants and received proceeds of
     $200,000.

     During the nine months ended  September 30, 2008, the Company issued 75,000
     options to an officer and a director to purchase common stock.  The options
     have an  exercise  price of $1.50 (the  trading  price of the shares at the
     date of the  grant)  and a fair  value at the grant  date of  $69,000.  The
     valuation  was  determined  using  the   Black-Scholes   method.   The  key
     assumptions  used were a volatility  of 98.1%,  dividend rate of 0%, a risk
     free rate of 1.9% and an expected life (using the simplified method) of 3.0
     years.
                                       10
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

8.   Shareholders' Equity (continued)

     Common Stock Purchase
     ---------------------

     In  September  2009,  the Board of  Directors  adopted a plan to purchase a
     certain number of shares from options holders on the exercise of options to
     encourage the option  holders to exercise  their options and to provide the
     option holder with a method to have cash for the tax on the  exercise.  The
     plan provides that the price to be paid for any shares  purchased  shall be
     the closing price of the common stock on the date of exercise.  Further the
     Company  will only provide up to $300,000  for all such  purchases  for all
     option exercises in the aggregate in any twelve month period. Subsequent to
     September  30, 2009,  the Company  purchased  59,963  shares for a total of
     $56,000.

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

     The  Company  displays  earnings  per  share  in  accordance  with ASC 260,
     "Earnings  Per Share" ("ASC 260").  ASC 260 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  are not included in the  computation  when their effect would be
     anti-dilutive.  The  following  table  presents  the  shares  used  in  the
     computation  of diluted  earnings  per share for the three and nine  months
     ended September 30, 2009 and 2008 (in thousands):
<TABLE>
<CAPTION>
---------------------------------------------------- ------------------------------------- --------------------------------------
                                                              Three Months Ended                     Nine Months Ended
                                                                September 30,                          September 30,
---------------------------------------------------- ------------------ ------------------ ------------------- ------------------
                                                              2009             2008               2009                2008
                                                              ----             ----               ----                ----
---------------------------------------------------- ------------------ ------------------ ------------------- ------------------
<S>                                                          <C>               <C>                <C>                 <C>
       Weighted Average Common shares outstanding            10,878            7,903              10,783              7,482
---------------------------------------------------- ------------------ ------------------ ------------------- ------------------
       Warrants to purchase common stock                         --              634                  --                842
---------------------------------------------------- ------------------ ------------------ ------------------- ------------------
       Options to purchase common stock                         383              987                 322              1,216
---------------------------------------------------- ------------------ ------------------ ------------------- ------------------
       Restricted stock grants                                   39               29                  32                 14
---------------------------------------------------- ------------------ ------------------ ------------------- ------------------
       Series A Convertible preferred stock                      --               --                  --              1,317
                                                     ------------------ ------------------ ------------------- ------------------
---------------------------------------------------- ------------------ ------------------ ------------------- ------------------
            Total diluted shares                             11,300             9,553             11,137             10,871
                                                     ================== ================== =================== ==================
---------------------------------------------------- ------------------ ------------------ ------------------- ------------------
</TABLE>
     Securities that could potentially dilute basic EPS in the future, that were
     not included in the computation of the diluted EPS consist of the following
     (in thousands):
<TABLE>
<CAPTION>
--------------------------------------------------- -------------------------------------- -------------------------------------
                                                              Three Months Ended                      Nine Months Ended
                                                                 September 30,                          September 30,
--------------------------------------------------- ----------------- -------------------- ------------------ ------------------
                                                               2009              2008                 2009               2008
                                                               ----              ----                 ----               ----
--------------------------------------------------- ----------------- -------------------- ------------------ ------------------
       <S>                                                      <C>              <C>                   <C>             <C>
       Options to purchase common stock                          75               123                   75                123
--------------------------------------------------- ----------------- -------------------- ------------------ ------------------
       Warrants to purchase common stock                        591               643                  591                643
--------------------------------------------------- ----------------- -------------------- ------------------ ------------------
       Restricted stock grants                                  308               577                  308                577
--------------------------------------------------- ----------------- -------------------- ------------------ ------------------
       Series A Convertible preferred stock                      --                --                   --                 --
                                                    ----------------- -------------------- ------------------ ------------------
--------------------------------------------------- ----------------- -------------------- ------------------ ------------------
             Total potential common shares                      974             1,343                  974              1,343
                                                    ================= ==================== ================== ==================
--------------------------------------------------- ----------------- -------------------- ------------------ ------------------
</TABLE>
                                       11
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

     Preferred Stock
     ---------------

     During the nine months ended  September 30, 2009, the Company  redeemed all
     of the outstanding Series B Redeemable  Preferred Stock ("Series B") in the
     amount of $974,000  and recorded  this amount as a reduction of  Additional
     Paid- in Capital.  The Company's Chairman and Chief Executive Officer, as a
     holder of the Series B, received $266,000 of the redemption amount.

8.   Shareholders' Equity (continued)

     Subsequent to September 30, 2009,  the Company  redeemed 50% (1,000 shares)
     of the outstanding Series C Redeemable  Preferred Stock ("Series C") in the
     amount of $1,0000,000 and recorded this amount as a reduction of Additional
     Paid- in Capital.  The  Company's  Chairman  and Chief  Executive  Officer,
     certain directors and Metropolitan Venture Partners II, L.P., as holders of
     the Series C, received $285,000 of the redemption  amount. The Series C can
     only be redeemed on the  approval  of the Board of  Directors,  and certain
     members of the Board are also  holders of the Series C Preferred  Stock and
     had  resolved  not to vote to redeem such  stock.  As such the Series C was
     recorded as equity.  In September 2009 the Board  rescinded this resolution
     and voted to redeem a portion of the Series C stock. At September 30, 2009,
     the Series C was reclassified from shareholders' equity to temporary equity
     based on the intent of the Company to redeem these shares in full.

9.   Products and Services

     The Company and its subsidiaries  currently operate in one business segment
     and provide two separate  products:  SaaS  services and custom  engineering
     services. The following table displays revenue by product (in thousands):
<TABLE>
<CAPTION>
                                        Three Months Ended                         Nine Months Ended
                                        ------------------                         -----------------
                                            September 30,                             September 30,
                                            -------------                             -------------
                                      2009                 2008                     2009           2008
                                   ---------             ---------                 -------      ---------
  <S>                                <C>                    <C>                     <C>            <C>
  SaaS fees                          $2,238                 $2,016                  $6,723         $5,668
  Custom engineering fees               236                    493                     925          1,142
                                   ---------             ---------                 -------      ---------
       Total Revenue                 $2,474                 $2,509                  $7,648         $6,810
                                   ========              =========                 =======      =========
</TABLE>
     Major Customers
     ---------------

     For the  three  and nine  month  periods  ended  September  30,  2009,  IBM
     accounted for 33.7% and 32.4% of revenue,  respectively,  compared to 41.1%
     and 45.0% for the three and nine month  periods  ended  September 30, 2008,
     respectively.  For the three and nine month  periods  ended  September  30,
     2009,  HP accounted for 51.8% of revenue,  respectively,  compared to 45.1%
     and 46.3% for the three and nine month  periods  ended  September 30, 2008,
     respectively.  For the three and nine month  periods  ended  September  30,
     2009,  Siemens  accounted  for 10.3% and  10.9% of  revenue,  respectively,
     compared  to 9.2% and 5.7% for the  three  and  nine  month  periods  ended
     September 30, 2008, respectively.  Accounts receivable from these customers
     amounted to  $1,601,000  and  $1,879,000 at September 30, 2009 and December
     31, 2008, respectively.

10.  Income Taxes

     In its interim financial statements the Company follows the guidance in ASC
     270, "Interim Reporting" ("ASC 240") and ASC 740, "Income Taxes" ("ASC270")
     whereby the Company  utilizes the  expected  annual  effective  tax rate in
     determining  its income tax provisions for the interim  period's  income or
     loss. As the Company has significant net operating loss carry-forwards, the
     approximate  effective  income tax rate  applied to the nine  months  ended
     September 30, 2009 income was 3.8%.  The Company  accounts for income taxes
     using the liability method. The liability method requires the determination
     of deferred tax assets and liabilities based on the differences between the
     financial  statement and income tax basis of assets and liabilities,  using
     enacted tax rates. Additionally,  net deferred tax assets are adjusted by a
     valuation  allowance if, based on the weight of available  evidence,  it is
     more  likely  than not that some  portion  or all of the net  deferred  tax
     assets will not be realized. The Company currently has significant deferred
     tax assets consisting  predominately of net operating loss  carry-forwards.
     ASC 740,  requires a valuation  allowance  be  established  when it is more
     likely  than not that all or a portion of  deferred  tax assets will not be
     realized.  During the nine months ended  September  30,  2008,  the Company
     reviewed  previous  positive  and negative  evidence and also  reviewed its
     expected  taxable  income for future  periods and concluded that it is more
     likely than not that  approximately  $2,867,000 of tax benefits  related to
     net operating loss carry-forwards will be utilized in future tax years and,

                                       12
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

10.  Income Taxes (continued)

     therefore,  reduced its  valuation  allowance  during the nine months ended
     September  30, 2008 in  accordance  with APB 28. As a result the  Company's
     effective  tax rate for the three and nine months ended  September 30, 2008
     differs from the current statutory rates. In addition,  the Company expects
     to provide a valuation allowance on the remaining future tax benefits until
     it can sustain a level of  profitability  that  demonstrates its ability to
     utilize the remaining assets, or other significant positive evidence arises
     that  suggests  its ability to utilize  the  remaining  assets.  The future
     realization of a portion of its reserved deferred tax assets related to tax
     benefits  associated  with  the  exercise  of  stock  options,  if and when
     realized, will not result in a tax benefit in the consolidated statement of
     operations,  but rather will result in an  increase in  additional  paid in
     capital.  The Company will  continue to re-assess  its reserves on deferred
     income tax assets in future periods on a quarterly  basis.  The Company has
     elected the "with and without approach"  regarding ordering of windfall tax
     benefits to  determine  whether the  windfall  tax benefit did reduce taxes
     payable in the current  year.  Under this approach the windfall tax benefit
     would be recognized in additional  paid-in-capital  only if an  incremental
     tax benefit is realized  after  considering  all other  benefits  presently
     available.

     At December 31, 2008,  the Company had federal and state net operating loss
     carryforwards  ("NOLs")  remaining  of  approximately  $72  million and $26
     million, respectively,  which may be available to reduce taxable income, if
     any. These NOLs expire through 2025.

11.  New Accounting Pronouncements

     In July 2009, the FASB issued SFAS No. 168, "The FASB Accounting  Standards
     Codification and the Hierarchy of Generally Accepted Accounting  Principles
     - a  replacement  of  FASB  Statement  No.  162"  ("SFAS  168").  SFAS  168
     establishes the FASB Accounting Standards Codification to become the source
     of  authoritative  U.S.  GAAP  recognized  by the  FASB  to be  applied  by
     non-governmental   entities.   Rules  and  interpretive   releases  of  the
     Securities  and  Exchange  Commission  (SEC)  under  authority  of  federal
     securities laws are also sources of authoritative GAAP for SEC registrants.
     On the effective date of this Statement,  the  Codification  will supersede
     all then-existing  non-SEC  accounting and reporting  standards.  All other
     non-grandfathered   non-SEC  accounting  literature  not  included  in  the
     Codification  will become  non-authoritative.  SFAS 168,  which changes the
     referencing  of financial  standards,  is  effective  for interim or annual
     financial periods ending after September 15, 2009. The Company has modified
     all earlier  references to accounting  standards to reflect the adoption of
     SFAS 168.

     In  June  2009,  the  FASB  issued  SFAS  No.  167,   "Amendments  to  FASB
     Interpretation  No.  46(R)"  ("SFAS  167").  This standard has not yet been
     integrated  into  the  ASC.  SFAS  167  eliminates  Interpretation  46(R)'s
     exceptions to consolidating qualifying  special-purpose entities,  contains
     new criteria for  determining  the primary  beneficiary,  and increases the
     frequency of required  reassessments to determine  whether a company is the
     primary beneficiary of a variable interest entity. SFAS 167 also contains a
     new requirement  that any term,  transaction,  or arrangement that does not
     have a  substantive  effect on an  entity's  status as a variable  interest
     entity, a company's power over a variable  interest entity,  or a company's
     obligation to absorb  losses or its right to receive  benefits of an entity
     must be  disregarded in applying  Interpretation  46(R)'s  provisions.  The
     elimination  of the  qualifying  special-purpose  entity  concept  and  its
     consolidation   exceptions   means  more   entities   will  be  subject  to
     consolidation  assessments  and  reassessments.  SFAS 167 will be effective
     January 1, 2010.  The Company  does not expect the  adoption of SFAS 167 to
     have any impact on its financial statements or results of operations.

     In May  2009,  the  FASB  issued  SFAS No.  165,  "Subsequent  Events"  now
     incorporated in ASC 855, "Subsequent Events". This Statement sets forth: 1)
     the period  after the  balance  sheet date  during  which  management  of a
     reporting entity should  evaluate events or transactions that may occur for

                                       13
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

11.  New Accounting Pronouncements (continued)

     potential  recognition  or disclosure in the financial  statements;  2) the
     circumstances under which an entity should recognize events or transactions
     occurring after the balance sheet date in its financial statements;  and 3)
     the  disclosures  that an entity  should make about events or  transactions
     that occurred after the balance sheet date. This Statement is effective for
     interim and annual periods ending after June 15, 2009. The company  adopted
     this  Statement in the quarter ended June 30, 2009.  This Statement did not
     impact  the  Company's  consolidated  financial  position  and  results  of
     operations.

     In October 2009, the FASB issued new accounting  guidance,  under ASC Topic
     605 "Revenue  Recognition",  which amends revenue recognition  policies for
     arrangements  with  multiple  deliverables.  This guidance  eliminates  the
     residual  method of revenue  recognition and allows the use of management's
     best estimate of selling price for  individual  elements of an  arrangement
     when vendor specific objective  evidence (VSOE),  vendor objective evidence
     (VOE) or  third-party  evidence  (TPE) is  unavailable.  This  guidance  is
     effective for all new or materially modified  arrangements  entered into on
     or after  January  1, 2011 with  earlier  application  permitted  as of the
     beginning  of a fiscal  year.  Full  retrospective  application  of the new
     guidance is optional.  The Company has not  completed  their  assessment of
     this new guidance on their  financial  condition,  results of operations or
     cash flows.


     In October 2009, the FASB issued new accounting  guidance,  under ASC Topic
     985  "Software",  which  amends  the  scope of  existing  software  revenue
     recognition  accounting.  Tangible products  containing software components
     and non-software components that function together to deliver the product's
     essential  functionality  would be scoped out of the accounting guidance on
     software and accounted for based on other appropriate  revenue  recognition
     guidance.  This guidance is effective  for all new or  materially  modified
     arrangements  entered  into  on or  after  January  1,  2011  with  earlier
     application   permitted  as  of  the  beginning  of  a  fiscal  year.  Full
     retrospective  application of this new guidance is optional.  This guidance
     must be adopted in the same  period  that the  company  adopts the  amended
     accounting for  arrangements  with multiple  deliverables  described in the
     preceding paragraph. The Company has not completed their assessment of this
     new guidance on their  financial  condition,  results of operations or cash
     flows.

12.  Subsequent Events

     The Company has evaluated events that occurred  subsequent to September 30,
     2009 through November 16, 2009, the date on which the financial  statements
     for the period ended September 30, 2009 were issued. Except as disclosed in
     Note 8 to these financial  statements,  management  concluded that no other
     events required disclosure in these financial statements.

                                       14
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

Item 2 - Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Forward looking statements

All statements  other than  statements of historical  fact included in this Form
10-Q 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-Q, 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,
the  dependence  on key  personnel,  and such other risk factors which may arise
from time to time  including,  but not limited to, the risk factors as set forth
in the  Company's  Reports  on Form 10K as filed  with the  Securities  Exchange
Commission. 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

Direct Insite Corp. and its  subsidiaries  (hereinafter  referred to at times as
"Direct Insite" or the "Company"),  was organized as a public company, under the
laws of the State of Delaware on August 27, 1987.  Direct  Insite  operates as a
Software as a Service  provider  ("SaaS"),  providing  best  practice  financial
supply chain  automation  and workflow  efficiencies  within the  Procure-to-Pay
(PTP) and Order-to-Cash (OTC) processes. The Company's global Electronic Invoice
Presentment and Payment ("EIP&P")  services  automate manual business  processes
such  as  complex  billing,  invoice  validation,   invoice-to-order   matching,
consolidation, dispute handling, and payment processing.

Direct  Insite is currently  delivering  service and  business  value across the
Americas,  Europe, and Asia,  including 62 countries,  15 languages and multiple
currencies. Direct Insite processes, hosts and distributes millions of invoices,
purchase orders, and attachment  documents making them accessible on-line within
an internet self service portal. Suppliers,  customers, and internal departments
such as Finance  and  Accounting  or  Customer  Service  users can access  their
business documents 24 hours per day, seven days per week, 365 days per year.

For the three and nine months ended  September 30, 2009, IBM accounted for 33.7%
and 32.4% of revenue,  respectively,  compared to 41.1% and 45.0% of revenue for
the three and nine month  periods  ended  September  30,  2008.  The decrease in
revenue from IBM is due to the  decrease in services to IBM in Europe  resulting
from the  discontinuance of one service IBM no longer required and a decrease in
engineering  services resulting from the completion of deploying the IOL service
to all major  geographies.  For the three and nine months  ended  September  30,
2009,  EDS an HP company  ("EDS")  accounted  for 51.8% of revenue,  compared to
45.1% and 46.3% of revenue for the three and nine month periods ended  September
30,  2008.  The  increase  in revenue  from EDS  results  from an  expansion  of
services.  Siemens Shared  Services LLC accounted for 10.3% and 10.9% of revenue
for the three and nine month  periods ended  September  30, 2009,  respectively,
compared to 9.2% and 5.7% of revenue for the three and nine month  periods ended
September 30, 2008. The increase in revenue from Siemens resulted from deploying
an additional service to Siemens in late 2008 and 2009.

                                       15
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

Critical accounting policies

Our condensed  consolidated  financial  statements and the notes thereto contain
information  that is pertinent to  management's  discussion  and  analysis.  The
preparation of financial  statements in conformity  with  accounting  principles
generally  accepted in the United States  requires  management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosures of contingent assets and liabilities. Management bases its estimates
on historical  experience and on various other  assumptions that are believed to
be reasonable under the  circumstances,  the results of which form the basis for
making  judgments about the carrying  values of assets and liabilities  that are
not readily  apparent  from other  sources.  On a continuing  basis,  management
reviews its estimates  utilizing  currently  available  information,  changes in
facts and circumstances, historical experience and reasonable assumptions. After
such  reviews,   and  if  deemed  appropriate,   those  estimates  are  adjusted
accordingly.  Actual results may vary from these estimates and assumptions under
different  and/or  future  circumstances.  Management  considers  an  accounting
estimate to be critical if:

     o    it requires assumptions to be made that were uncertain at the time the
          estimate was made; and

     o    changes in the estimate,  or the use of different  estimating  methods
          that could  have been  selected,  could have a material  impact on the
          Company's  condensed  consolidated  results of operations or financial
          condition.

The following critical  accounting policies have been identified that affect the
more  significant  judgments  and  estimates  used  in  the  preparation  of the
consolidated financial statements. We believe that the following are some of the
more critical judgment areas in the application of our accounting  policies that
affect our financial condition and results of operations.  We have discussed the
application of these critical accounting policies with our Audit Committee.  The
following  critical  accounting  policies are not intended to be a comprehensive
list of all of the Company's accounting policies or estimates.


Revenue Recognition
-------------------

We record revenue in accordance with ASC 605 "Revenue  Recognition"  ("ASC 605")
and SEC Staff  Accounting  Bulletin  Topic 13 "Revenue  Recognition in Financial
Statements."  In some  circumstances,  we enter into  arrangements  whereby  the
Company is  obligated  to  deliver  to its  customer  multiple  products  and/or
services (multiple deliverables).  In these transactions,  the Company allocates
the  total  revenue  to be  earned  among the  various  elements  based on their
relative fair values.  The Company  recognizes  revenue related to the delivered
products or services only if:

o Any undelivered products or services are not essential to the functionality of
the delivered products or services;

o Payment for the delivered products or services is not contingent upon delivery
of the remaining products or services;

o We have an enforceable  claim to receive the amount due in the event we do not
deliver the undelivered products or services and it is probable that such amount
is collectible;

o There is  evidence of the fair value for each of the  undelivered  products or
services;

o Delivery of the delivered  element  represents the culmination of the earnings
process.

     The following are the specific revenue recognition  policies for each major
category of revenue.
                                       16
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

SaaS Services
-------------

We provide  transactional  data  processing  services  through our SaaS software
solutions to our  customers.  The customer is charged a monthly  fixed rate on a
per  transaction  basis or a fixed fee  based on  monthly  transaction  volumes.
Revenue is recognized as the services are performed.

Custom Engineering Services
---------------------------

We perform custom engineering  services which are single contractual  agreements
involving  modification  or  customization  of the  Company's  proprietary  SaaS
software  solution.  Progress  is  measured  using the  relative  fair  value of
specifically identifiable output measures (milestones). Revenue is recognized at
the lesser of the milestone  amount when the customer accepts such milestones or
the percentage of completion of the contract following the guidance of ASC 605.

Cost of Revenue
---------------

Cost of  revenue in the  condensed  consolidated  statements  of  operations  is
presented along with operations, research and development costs and exclusive of
amortization and depreciation  shown  separately.  Custom  Engineering  Services
costs  related to  uncompleted  milestones  are  deferred  and included in other
current assets, when applicable.

Allowance For Doubtful Accounts
-------------------------------

The  allowance  for doubtful  accounts  reflects  management's  best estimate of
probable  losses  inherent  in  the  account  receivable   balance.   Management
determines  the  allowance   based  on  known  troubled   accounts,   historical
experience,  and other currently available  evidence.  At September 30, 2009 and
December 31, 2008, an allowance for doubtful  accounts is not provided since, in
the opinion of management, all accounts are deemed collectible.

Impairment of Long-Lived Assets
-------------------------------

ASC 360  requires  management  judgments  regarding  the  future  operating  and
disposition plans for marginally  performing  assets,  and estimates of expected
realizable values for assets to be sold. The Company accounts for its long-lived
assets in accordance  with ASC 360 "Property,  Plant and Equipment" for purposes
of determining and measuring  impairment of its other intangible  assets.  It is
the Company's policy to periodically review the value assigned to its long lived
assets,  including  capitalized  software  costs, to determine if they have been
permanently  impaired by adverse conditions.  If required,  an impairment charge
would be recorded based on an estimate of future discounted cash flows. In order
to test for recoverability, the Company compared the sum of an undiscounted cash
flow projection from the related long-lived assets to the net carrying amount of
such  assets.   Considerable   management  judgment  is  necessary  to  estimate
undiscounted  future  operating  cash flows and fair  values  and,  accordingly,
actual  results  could vary  significantly  from such  estimates.  No impairment
charges  were  recognized  during the nine months ended  September  30, 2009 and
2008, respectively.

Income Taxes
------------

We  currently  have  significant  deferred tax assets.  ASC 740 "Income  Taxes",
requires a valuation  allowance be  established  when it is more likely than not
that all or a portion of deferred tax assets will not be realized.  Furthermore,
accounting  standards  provide that it is difficult to conclude that a valuation
allowance  is not needed  when there is  negative  evidence  such as  cumulative
losses in recent  years.  Therefore,  cumulative  losses  weigh  heavily  in the
overall assessment. The future realization of a portion of our reserved deferred
tax  assets  related  to tax  benefits  associated  with the  exercise  of stock
options,  if  and  when  realized,  will  not  result  in a tax  benefit  in the
consolidated  statement of operations,  but rather will result in an increase in
additional  paid in capital.  We will  continue  to  re-assess  our  reserves on
deferred  income tax assets in future periods on a quarterly  basis (see note 10
to the Condensed Consolidated Financial Statements).

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                      DIRECT INSITE CORP. AND SUBSIDIARIES

Use of Estimates
----------------

In preparing  financial  statements in  conformity  with  accounting  principles
generally  accepted  in the  United  States of  America,  our  management  makes
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities and disclosures of contingent  assets and liabilities at the date of
the  consolidated  financial  statements,  as well as the  reported  amounts  of
revenue and expenses during the reporting period.  Certain items,  among others,
that are  particularly  sensitive to estimates  are revenue  recognition,  stock
based  compensation,  fair  value  of  warrant  liabilities  and  the  valuation
allowance  on  deferred  tax  assets.  Actual  results  could  differ from those
estimates.

Results of operations

For the three and nine month periods ended  September 30, 2009 we had net income
of $465,000 and $1,397,000, respectively, compared to net income of $418,000 and
$3,721,000  for the three and nine  month  periods  ended  September  30,  2008,
respectively.  During the nine months ended  September  30, 2008,  we recorded a
benefit from income taxes of  $2,867,000  as a result of reducing the  valuation
allowance on our deferred tax assets for net operating  loss  carry-forwards  we
more likely than not expect to utilize in future years.

For the three months ended September 30, 2009 revenue  decreased  $35,000 (1.4%)
to  $2,474,000,  compared to revenue of  $2,509,000  for the three  months ended
September 30, 2008. The decrease was due to a decrease in  engineering  services
revenue of $257,000 (52.1%),  offset by an increase in recurring SaaS revenue of
$222,000 (11.0%). The decrease in engineering services revenue was the result of
a decrease in services to IBM, while the increase in recurring  revenue resulted
from increased  recurring  revenue from EDS and Siemens as a result of expanding
the recurring  services to these companies.  For the nine months ended September
30, 2009, revenue increased $838,000 (12.3%) to $7,648,000,  compared to revenue
of $6,810,000  for the nine months ended  September 30, 2008.,  This increase is
primarily the result of an increase in our recurring  SaaS IOL services  revenue
of $1,055,000  (18.6%)  resulting from increases in services to EDS, Siemens and
other customers.  This increase was offset by a decrease in engineering services
revenue of $217,000  (19.0%),  as a result of substantially  completing  certain
projects for EDS.

Costs of operations,  research and  development  decreased  $122,000  (12.4%) to
$862,000  for the three  months ended  September  30, 2009  compared to the same
period in 2008. For the nine months ended September 30, 2009 cost of operations,
research and  development  decreased  $81,000  (2.9%) to $2,735,000  compared to
costs  for the nine  months  ended  September  30,  2008.  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 cost for purchased services,  network costs, costs
of the production  co-location  facility and other expenses  directly related to
our  custom  engineering  and SaaS  production  services.  During the nine month
period ended September 30, 2009 costs of goods sold increased  $355,000 compared
to costs for the same period in 2008 due to an  increase in costs for  purchased
services  for  outsourcing  certain  services  in support  of a new IOL  product
offering to one customer.  For the three months ended September 30, 2009 cost of
goods sold decreased  $9,000.  Professional  fees decreased $81,000 and $231,000
for the three and nine months ended September 30, 2009,  respectively,  compared
to costs  for such  services  in 2008.  In 2008  the  Company  engaged  contract
development  staff  to  support  the  implementation  of a new  service  to  one
customer.  Also  during the three and nine  months  ended  September  30,  2009,
salaries  and  related  costs  decreased  $60,000  and  $207,000,  respectively,
compared  to cost  for the  same  periods  in 2008  due to the  reassignment  of
personnel to sales and  marketing.  For the three and nine month  periods  ended
September 30, 2009, rents increased $31,000 and $46,000,  respectively  compared
to costs for the same  periods in 2008.  The increase is  principally  due to an
increase in costs for our collocations data centers.  Other costs of operations,
research  and  development  decreased  $3,000 and $44,000 for the three and nine
months ended  September 30, 2009,  respectively,  compared to other costs in the
same periods in 2008.

Sales and marketing  costs  increased  $91,000  (33.3%) to $364,000 and $369,000
(53.3%) to $1,061,000  for the three and nine month periods ended  September 30,
2009,  compared to costs of $273,000  and  $692,000 for the three and nine month
periods  ended  September  30,  2008,  respectively.  The  increase is due to an
increase  in  personnel  costs of $59,000  and  $305,000  for the three and nine
months ended  September 30, 2009 compared to costs for the same periods in 2008.
The  increase in personnel  costs is primarily  due to the addition of personnel

                                       18
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                      DIRECT INSITE CORP. AND SUBSIDIARIES

and the  reassignment of personnel from other  departments in support of new and
continuing  clients.  All other sales and marketing costs increased  $32,000 and
$64,000  for the three and nine  months  ended June 30,  2009  compared to other
costs for the same periods in 2008.

General and administrative  costs decreased $180,000 (24.1%) to $567,000 for the
three months  ended  September  30, 2009,  compared to costs of $747,000 for the
same period in 2008.  For the nine months ended  September  30, 2009 these costs
decreased  $250,000 (11.4%) to $1,947,000  compared to costs for the nine months
ended  September 30, 2008. The decrease for the three months ended September 30,
2009 is principally  due to a decrease in  professional  fees of $66,000,  legal
fees of $25,000  and audit fees of  $28,000.  In 2008 the Company had engaged an
investment  advisor  which did not continue in 2009.  All other costs  decreased
$61,000  net  compared to the same  period in 2008.  For the nine  months  ended
September 30, 2009 salaries and related costs decreased  $75,000  primarily as a
result  of a  decrease  in  stock  compensation  costs,  and  professional  fees
decreased  $156,000  again the result of not engaging an  investment  advisor in
2009. All other general and administrative  costs decreased $19,000 net compared
to the same period in 2008.

Amortization and depreciation expense was $87,000 and $277,000 for the three and
nine months  ended  September  30,  2009,  respectively,  an increase of $13,000
(17.6%)  and  $50,000  (22.0%)  over  costs for the same  periods  in 2008.  The
increase is due to the purchase of  equipment  for our second  collocation  data
center  facility  in late 2008 and the  purchase of new  accounting  software in
2008.

Other expense for the three and nine months ended September 30, 2009 consists of
the change in the fair value of the warrant  liability of $101,000 and $158,000,
respectively.

Interest  expense,  net,  was $6,000 and  $19,000  for the three and nine months
ended  September 30, 2009,  respectively,  compared to interest,  net, of $0 and
interest expense,  net, of $11,000 for the same periods in 2008. The increase is
principally  due to an  increase  in  borrowings  to finance  capital  equipment
acquisitions.

Financial Condition and Liquidity

Cash provided by operating  activities  for the nine months ended  September 30,
2009 was  $2,595,000  compared  to cash  provided  by  operating  activities  of
$1,495,000 for the nine months ended  September 30, 2008.  This consisted of net
income of  $1,397,000,  increased  by non-cash  income and expenses of $865,000,
including  depreciation  and amortization of property and equipment of $277,000,
stock-based compensation expense of $430,000 and the change in the fair value of
the warrant liability of $158,000.  In addition accounts receivable decreased by
$265,000 and prepaid expenses  decreased  $57,000.  Accounts payable and accrued
expenses decreased $96,000, while deferred revenue increased $107,000.

Cash  used in  investing  activities  was  $43,000  for the  nine  months  ended
September  30,  2009,  compared  to $198,000  for same period in 2008.  This was
principally expenditures for equipment.

Cash used in financing  activities  totaled $1,289,000 for the nine months ended
September 30, 2009, compared to cash used in financing  activities of $2,427,000
for the nine months ended  September  30, 2008.  In July 2009 we redeemed all of
the Series B  Redeemable  Preferred  stock for  $974,000.  We paid  $282,000  in
dividends on preferred  stock and repaid  $133,000 of long-term debt and capital
lease obligations in the first nine months of 2009 and we received proceeds from
the  exercise of warrants  of  $100,000.  Subsequent  to  September  30, 2009 we
redeemed $1,000,000 of the Series C Redeemable Preferred stock.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have, or are reasonably likely to
have,  a current or future  effect on our  financial  condition,  changes in our
financial  condition,  revenues or expenses,  results of operations,  liquidity,
capital expenditures or capital resources that are material to investors.

                                       19
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES


Item 3.  Quantitative and Qualitative Disclosure About Market Risk

         Not applicable

Item 4T. Controls and Procedures

      Evaluation of Disclosure Controls and Procedures
      -------------------------------------------------

     The Company maintains disclosure controls and procedures designed to ensure
     that information  required to be disclosed in the reports it files with the
     SEC is accumulated and communicated to management, as appropriate, to allow
     timely decisions  regarding  required  disclosure,  and such information is
     recorded,  processed,  summarized  and  reported  within  the time  periods
     specified in the SEC's rules and forms.  Under the supervision and with the
     participation of our management,  including our Chief Executive Officer and
     Chief  Financial  Officer,  we  have  evaluated  the  effectiveness  of our
     disclosure  controls  and  procedures  as such term is defined by the rules
     established under the Securities Exchange Act of 1934.

     Based on our  evaluation  which took place as of  September  30,  2009 (the
     "Evaluation  Date"), we believe that these procedures were not effective as
     a result  of  limited  resources  and a  limited  segregation  of duties in
     accounting and financial  reporting.  More specifically,  the Company has a
     limited  number  of  personnel  in the  finance  and  accounting  area  and
     therefore one person performs various accounting  functions where a greater
     segregation  of duties  would  permit  checks and balances and reviews that
     would improve internal control. The Company has been aware of this material
     weakness  since  January  2004 at which  time the  staff of the  accounting
     department was reduced.  As a result the Chief  Financial  Officer  devotes
     substantive time to reviewing the accounting records and financial reports.
     The  Company  recently  employed a  qualified  accountant  and the  Company
     expects that it will reassign certain responsibilities and tasks previously
     performed  by the  Chief  Financial  Officer  and that  this  will  improve
     internal disclosure controls and internal controls over financial reporting

     Changes in Internal Control Over Financial Reporting

     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  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.  In 2007 the Company  adopted and  implemented the
     control  requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the
     "Act").

     There  was no change  in the  Company's  internal  control  over  financial
     reporting  during the  Company's  last fiscal  quarter that has  materially
     affected,  or is  reasonably  likely to  materially  affect,  the Company's
     internal control 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,  there is only limited  segregation of
     duties within the accounting function,  leaving most significant aspects of
     financial reporting in the hands of the CFO.

     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 as of the
     Evaluation  Date,  under  standards   established  by  the  Public  Company
     Accounting  Oversight Board. As previously stated, the reportable condition
     and  material  weakness  relates to limited  segregation  of duties and the
     absence  of  reviews  and  approvals  beyond  that  performed  by the Chief
     Financial  Officer as  mentioned  above,  of  transactions  and  accounting
     entries. The Company believes that the employment of a qualified accountant
     as discussed above will improve internal control over financial reporting.

                                       20
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                      DIRECT INSITE CORP. AND SUBSIDIARIES

                           PART II - OTHER INFORMATION




Item 6. Exhibits


     31   Certifications  pursuant  to Rules  13a-14(a)/15(d)-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.

                                       21
<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           November 16, 2009



/s/ Michael J. Beecher
-------------------------------------------
Michael J. Beecher,  Chief Financial Officer          November 16, 2009