UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                   FORM 10-QSB
                                   (Mark One)


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


                For the quarterly period ended September 30, 2007

                                       OR

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


                 For the transition period from ______ to ______

                          Commission File No. 0 - 20660


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


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


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


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

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

                         Yes   X            No

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 October  31,
2007 was: 6,916,940.

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


<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

                                      INDEX

<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION                                                                                 Page
<S>                                                                                                            <C>
     Item 1

     Condensed Consolidated Balance Sheets as of September 30, 2007 (Unaudited) and
       December 31, 2006 .................................................................................        3
     Condensed Consolidated Statements of Operations
       For the Three and Nine Months Ended September 30, 2007 and 2006 (Unaudited)........................        4

     Condensed Consolidated Statements of Cash Flows
       For the Nine Months Ended September 30, 2007 and 2006 (Unaudited)..................................        5

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

     Item 2

     Management's Discussion and Analysis or Plan of Operations ..........................................       17

     Item 3

     Controls and Procedures..............................................................................       23

PART II - OTHER INFORMATION

     Item 1. Legal Proceedings ...........................................................................       25

     Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..................................       25

     Item 3. Defaults Upon Senior Securities .............................................................       25

     Item 4.  Submission of Matters to a Vote of Security Holders ........................................       25

     Item 5. Other Information ...........................................................................       25

     Item 6. Exhibits.....................................................................................       25

     Signatures ..........................................................................................       26


CERTIFICATIONS ...........................................................................................       27
</TABLE>
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                 AS OF SEPTEMBER 30, 2007 AND DECEMBER 31, 2006
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                  September 30,         December 31,
                                                                                      2007                 2006
                                                                              --------------------- --------------------
                                                                                  (Unaudited)             (Audited)
ASSETS
Current assets
<S>                                                                           <C>                   <C>
  Cash and cash equivalents                                                   $           1,933     $             295
  Accounts receivable, net of allowance for doubtful accounts of
   $0 in 2007 and 2006                                                                    1,678                 1,999
  Prepaid expenses and other current assets                                                 125                   139
                                                                              --------------------- --------------------
       Total current assets                                                               3,736                 2,433

Property and equipment, net                                                                 428                   450
Other assets                                                                                275                   280
                                                                              --------------------- --------------------
         TOTAL ASSETS                                                          $          4,439     $           3,163
                                                                              ===================== ====================

LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities
  Short-term revolving loans                                                   $            590     $             481
  Lines of credit                                                                             0                   586
  Current portion of capital lease obligations                                               38                    58
  Current portion of notes payable                                                           78                    53
  Accounts payable and accrued expenses                                                   1,629                 2,028
  Dividends payable                                                                       3,147                 2,489
  Deferred revenue                                                                          343                   564
  Warrant liability                                                                           0                   602
  Liabilities from discontinued operations                                                   14                    37
                                                                              --------------------- --------------------
       Total current liabilities                                                          5,839                 6,898

Capital lease obligations, net of current portion                                             5                    34
Notes payable, net of current portion                                                       160                   130
                                                                              --------------------- --------------------
       Total liabilities                                                                  6,004                 7,062
                                                                              --------------------- --------------------

Commitments and contingencies

Shareholders' deficiency
 Preferred stock, $0.0001 par value; 2,000,000 shares authorized;
  Series A Convertible Preferred, 134,680 issued and outstanding
  in 2007 and 2006; liquidation preference of $2,750,000;
  Series B Redeemable Preferred, 974 shares issued and outstanding in                         -                     -
  2007 and 2006; liquidation preference of $974,075;
  Series C Redeemable Preferred, 2,000 shares issued and outstanding                          -                     -
  in 2007 and 2006; liquidation preference of $2,000,000;
  Series D Redeemable Preferred, 100 shares issued and outstanding
  in 2007 and 2006; liquidation preference of $100,000.
 Common stock, $0.0001 par value; 50,000,000 shares authorized;
 6,953,554 shares issued in 2007 and 5,293,311 shares issued in 2006;
 and 6,913,627 shares outstanding in 2007 and 5,253,384 shares
 outstanding in  2006                                                                        1                      -
 Additional paid-in capital                                                            114,597                113,185
 Accumulated deficit                                                                  (115,835)              (116,756)
                                                                              --------------------- --------------------
                                                                                        (1,237)               (3,571)

  Common stock in treasury, at cost  - 24,371 shares                                      (328)                 (328)
                                                                              --------------------- --------------------
       Total shareholders' deficiency                                                   (1,565)               (3,899)
                                                                              --------------------- --------------------

          TOTAL LIABILITIES AND SHAREHODERS' DEFICIENCY                       $          4,439      $            3,163
                                                                              ===================== ====================
</TABLE>
See notes to condensed consolidated financial statements.                      3

<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 and 2006
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                   Three Months Ended                Nine Months Ended
                                                                   ------------------                -----------------
                                                                     September 30,                     September 30,
                                                                     -------------                     -------------
                                                                  2007            2006             2007             2006
                                                            --------------- --------------- ----------------- ----------------

<S>                                                         <C>             <C>             <C>                <C>
Revenue                                                     $       2,582   $       2,185   $       7,416      $      6,396
                                                            --------------- --------------- ----------------- ----------------

Costs and expenses
  Operations, research and development                                844             785           2,706             2,851
  Sales and marketing                                                 245             296             873             1,109
  General and administrative                                          871             612           1,931             1,957
  Depreciation and amortization                                        78              76             259               239
                                                            --------------- --------------- ----------------- ----------------
                                                                     2038           1,769           5,769             6,156
                                                            --------------- --------------- ----------------- ----------------
Operating income                                                      544             416           1,647               240

Other expenses
  Change in fair value of warrant liability                            --             254              --               (15)
  Other (income) expense, net                                          --              45              (8)              112
  Interest expense, net                                                20             210              86               543
                                                            --------------- --------------- ----------------- ----------------

Income (loss) before provision for income tax                         524             (93)          1,569              (400)
Provision for income tax                                              --              --              27                --
                                                            --------------- --------------- ----------------- ----------------

Net income (loss)                                                     524             (93)          1,542              (400)

Preferred stock dividends                                            (227)           (181)           (658)             (529)
                                                            --------------- --------------- ----------------- ----------------

Net income (loss) attributable to common shareholders       $         297   $        (274)  $         884     $        (929)
                                                            =============== ==============  ================= ================

Basic  income (loss) per share attributable
 to common shareholders                                     $        0.05   $       (0.01)  $        0.16    $         0.23)
                                                            =============== ==============  ================= ================
Fully diluted income (loss) per share attributable
 to common shareholders                                     $        0.03   $       (0.01)  $        0.11    $         0.23)
                                                            =============== ==============  ================= ================
Basic weighted average common shares outstanding                    6,082           4,679           5,650             4,600
                                                            =============== ==============  ================= ================
Fully diluted weighted average common shares outstanding            9,014           4,679           8,136             4,600
                                                            =============== ==============  ================= ================
</TABLE>
See notes to condensed consolidated financial statements.                      4
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                         For the Nine Months Ended
                                                                                         -------------------------
                                                                                               September  30,
                                                                                               --------------
                                                                                           2007               2006
                                                                                   ------------------- ------------------
<S>                                                                                  <C>                 <C>
Cash flows from operating activities
 Net income (loss) from continuing operations                                        $       1,542      $        (400)
 Adjustments to reconcile net income (loss) from continuing operations
  to net cash provided by continuing operations:
   Amortization and depreciation:
     Property and equipment                                                                    259                 239
     Discount on debt                                                                           --                 375
    Stock based compensation expense                                                           458                 136
    Change in fair value of warrant liability                                                   --                 (15)
    Gain on sale of investment                                                                  (8)                 --

  Changes in operating assets and liabilities:
    Accounts receivable                                                                        320                 430
    Prepaid expenses and other current assets                                                   14                 146
    Other assets                                                                                 3                   7
    Accounts payable and accrued expenses                                                      (37)                217
    Deferred revenue                                                                          (221)             (225)
                                                                                   ------------------- ------------------
       Net cash provided by continuing operations                                            2,330                910
                                                                                   ------------------- ------------------

  Change in:
    Liabilities from discontinued operations                                                   (23)                (15)
                                                                                   ------------------- ------------------
       Net cash used in discontinued operations                                                (23)                (15)
                                                                                   ------------------- ------------------
       Net cash provided by operating activities                                             2,307                 895
                                                                                   ------------------- ------------------

Cash flows used in investing activities
 Proceeds from sale of investment                                                                8                  --
 Expenditures for property and equipment                                                      (130)                (73)
                                                                                   ------------------- ------------------
          Net cash used in investing activities                                               (122)                (73)
                                                                                   ------------------- ------------------

Cash flows used in financing activities
 Proceeds from issuance of shares on exercise of options                                        28                  --
 Proceeds (Repayments) of revolving loans, net                                                 110                (364)
 Repayment of lines of credit                                                                 (586)                (29)
 Principal payments on capital lease obligations                                               (50)                (82)
 Repayments of long-term debt                                                                  (49)                 (7)
                                                                                   ------------------- ------------------
       Net cash used in financing activities                                                  (547)               (482)
                                                                                   ------------------- ------------------

Net increase in cash and cash equivalents                                                    1,638                 340

Cash and cash equivalents - beginning of period                                                295                 364
                                                                                   ------------------- ------------------

Cash and cash equivalents - end of period                                          $         1,933      $          704
                                                                                   =================== ==================

Cash paid for interest
                                                                                   $            90      $          129
                                                                                   =================== ==================
Cash paid for income taxes                                                         $            14      $           --
                                                                                   =================== ==================
Non-cash investing and financing activities:
Acquisition of equipment through issuance of debt                                  $           104      $           43
                                                                                   =================== ==================
Dividends accrued and unpaid                                                       $           658      $          529
                                                                                   =================== ==================
Reclassification of warrant liability                                              $           602      $           --
                                                                                   =================== ==================
Common stock issued in settlement of accrued expenses                              $           360      $           46
                                                                                   =================== ==================
</TABLE>
See notes to condensed consolidated financial statements                       5

<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006



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, 2007,  and the  condensed
     consolidated statements of operations and cash flows for the three and nine
     month periods ended  September 30, 2007 and 2006, 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-QSB.
     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,  2006  balance  sheet  data  was  derived  from  the  audited
     consolidated  financial  statements,  but does not include all  disclosures
     required  by  GAAP.  These  interim   financial   statements   include  all
     adjustments which management considers necessary for a fair presentation of
     the financial statements and consist of normal recurring items. The results
     of  operations  for the three and nine month  periods  ended  September 30,
     2007,  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, 2006  included in the  Company's
     Form-10KSB.  The  accounting  policies  used in preparing  these  unaudited
     condensed  consolidated  financial  statements  are  consistent  with those
     described  in  the  audited  December  31,  2006   consolidated   financial
     statements except for the adoption of Financial  Accounting Standards Board
     Staff Position EITF 00-19-2 ("FSP EITF  00-19-2") and Financial  Accounting
     Standards  Board's  Interpretation  No. 48,  "Accounting for Uncertainty in
     Income  Taxes,  an  interpretation  of FASB  Statement No. 109" ("FIN 48"),
     which is discussed in Notes 3 and 4 below.

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

     In preparing condensed consolidated 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,  fair value of derivative warrants,
     stock based  compensation,  valuation allowance on deferred tax assets, and
     management's  plans,  as disclosed in Note 11. Actual  results could differ
     from those estimates.
                                                                               6
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006




2.   The Company

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

     A  complete  Internet  Customer  Care  tool set  integrated  with the EIP&P
     product  set is  also  available.  In  2007,  the  Company  operated  fully
     redundant  data centers  located at its main office in Bohemia,  N.Y. and a
     co-location facility in Hauppauge, NY.

     Management's  liquidity  plans are discussed in Note 11. Also, as described
     in Note 10, the Company has two customers that accounted for  approximately
     49.1% and 47.6% of the  Company's  revenue for the nine month  period ended
     September 30, 2007 and 68.5% and 29.5% of revenue for the nine month period
     ended  September 30, 2006.  Loss of either of these  customers would have a
     material adverse effect on the Company.


3.   Change in Accounting Principle

     Prior to January 1, 2007 the Company,  under the  provisions  of EITF 00-19
     "Accounting   for  Derivative   Financial   Instruments   Indexed  to,  and
     Potentially  Settled in, a Company's Own Stock", was required to record the
     warrants issued in conjunction with a bridge loan as a derivative liability
     at fair  value  on the date of  issuance  due to the  registration  payment
     arrangements included in the financing and warrant agreements.  At December
     31, 2006 the fair value of the warrant  liability was $602,000.  In January
     2007, the Company  changed the method of accounting  following the guidance
     of FSP EITF 00-19-2 which provides that the  contingent  obligation to make
     future  payments  under  a  registration   payment  arrangement  should  be
     accounted for as a separate agreement in accordance with FASB Statement No.
     5,  Accounting  for  Contingencies.  As a result the warrant  liability  of
     $575,000  was  reclassified  to  Additional  Paid In  Capital  based on its
     original fair value and the  cumulative  effect of the change in accounting
     principle of $37,000 was recorded as a credit to accumulated  deficit.  The
     cumulative effect upon adoption of FSP EITF 00-19-2 is summarized below:
<TABLE>
       <S>                                                                <C>
       Accumulated deficit - December 31, 2006                            $(116,756)
         Cumulative effect of the change in accounting principle                 37
                                                                       --------------

       Accumulated deficit - January 1, 2007                             $(116,719)
                                                                       ==============
</TABLE>
4.   Accounting for Uncertainty in Income Taxes

     The Company adopted FIN 48, effective January 1, 2007. FIN 48 clarifies the
     accounting  for  uncertainty  in  income  taxes   recognized  in  financial
     statements  and requires the impact of a tax position to be  recognized  in
     the financial  statements if that position is more likely than not of being
     sustained by the taxing  authority.  FIN 48 is  effective  for fiscal years
     beginning  after  December 15,  2006,  and is to be applied to all open tax
     years as of the date of  effectiveness.  FIN 48 also  provides  guidance on
     de-recognition,  classification,  interest  and  penalties,  accounting  in
     interim periods, disclosure and transition.  There were no unrecognized tax
     benefits as of January 1, 2007.

                                                                               7
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006



     The Company has  identified its federal tax return and its state tax return
     in New York as "major" tax  jurisdictions,  as defined in FIN 48.  Based on
     the  Company's  evaluation,  it  has  been  concluded  that  there  are  no
     significant  uncertain tax positions requiring recognition in the Company's
     financial statements.  The Company's evaluation was performed for tax years
     ended 2003 through  2006,  the only  periods  subject to  examination.  The
     Company  believes  that its income tax  positions  and  deductions  will be
     sustained  upon audit and does not  anticipate  any  adjustments  that will
     result in a material  change to its financial  position.  In addition,  the
     Company  did not  record a  cumulative  effect  adjustment  related  to the
     adoption  of FIN 48. The  Company  has  elected to  classify  interest  and
     penalties  incurred  on income  taxes,  if any, as income tax  expense.  No
     interest or penalties on income  taxes have been  recorded  during the nine
     months  ended   September  30,  2007.  The  Company  does  not  expect  its
     unrecognized  tax benefit position to change during the next twelve months.
     Management  is  currently  unaware of any issues  under  review  that could
     result in significant  payments,  accruals or material  deviations from its
     position.  The  adoption  of FIN 48 did not have a  material  effect on our
     consolidated financial position, results of operations or cash flows.

5.   Stock Based Compensation

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

     Effective  January 1, 2006, the Company adopted the fair value  recognition
     provisions  of  Statement of Financial  Accounting  Standards  ("SFAS") No,
     123(Revised  2004),  "Share-Based  Payment",  ("SFAS  123(R)"),  using  the
     modified-prospective-transition method. As a result, for the three and nine
     month periods ended  September 30, 2007, the Company  recorded  $11,000 and
     $70,000,  respectively,  in  compensation  expense  for the  fair  value of
     options. For the three and nine month periods ended September 30, 2006, the
     Company recorded $21,000 and $69,000, respectively, in compensation expense
     for the fair value of options.  At September 30, 2007, there was $45,000 of
     total  unrecognized  compensation  costs related to stock  options  granted
     which is expected to be recognized  over a weighted  average  period of 1.1
     years.

     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, 2007, 5,820,000 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
     80,000 and  360,000  options  issued  during the nine month  periods  ended
     September 30, 2007 and 2006, respectively.  The weighted average grant date
     fair value of these  options was  $29,000  for  options  issued in 2007 and
     $48,000 for the options issued in 2006. 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 9).

                                                                               8
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006


     A summary  of option  activity  under the plans for the nine  months  ended
     September 30, 2007 is as follows:
<TABLE>
<CAPTION>
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------

                                                                                 Weighted Average
                                                              Weighted Average     Remaining          Aggregate Intrinsic
                                               Shares          Exercise Price      Contractual              Value
                                           (in thousands)                         Term (in years)       (in thousands)
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
   <S>                                         <C>                 <C>                   <C>                 <C>
   Balance, January 1, 2007                    4,604               $1.15
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Granted                                    80               $0.70
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Exercised                                (213)              $1.27
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Canceled                               (1,710)              $1.63
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Forfeited                                  --
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
   Balance, September 30, 2007                 2,761               $0.84                 2.4                 $3,469
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
   Exercisable, September 30, 2007             2,563               $0.88                 2.3                 $3,140
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
</TABLE>
     The  total  fair  value of  shares  vested  during  the nine  months  ended
     September 30, 2007 was $63,000.

     Restricted Stock Grants
     -----------------------
     A summary  of the  status of the  Company's  restricted  non-vested  shares
     issued  pursuant to  employment  agreements  as of  September  30, 2007 and
     changes during the nine months ended  September 30, 2007 is presented below
     (see Note 12):
<TABLE>
<CAPTION>
------------------------------------------- ----------------------------------- ----------------------------------------------

              Non-vested Shares                     Shares (in thousands)       Weighted-average Grant Date Fair Value
------------------------------------------- ----------------------------------- ----------------------------------------------
<S>                                                       <C>                                   <C>
Non-vested at January 1, 2007                               --
------------------------------------------- ----------------------------------- ----------------------------------------------
Granted                                                    820                                  $2.25
------------------------------------------- ----------------------------------- ----------------------------------------------
Vested                                                    (150)                                 $2.25
                                            --------------------------------------
------------------------------------------- ----------------------------------- ----------------------------------------------
Non-vested at September 30, 2007                           670                                  $2.25
                                            ====================================================================
------------------------------------------- ----------------------------------- ----------------------------------------------
</TABLE>

     The future expected expense for non-vested shares is $1,514,000 and will be
     recognized on a straight-line basis over the period October 1, 2007 through
     December 31, 2010.


6.   Discontinued Operations

     In  2001,  the  Company  and  Platinum  Communications,  Inc.  ("Platinum")
     completed  a  merger  under  an  Agreement  and  Plan  of  Merger  ("Merger
     Agreement").  Under the  Merger  Agreement,  a newly  formed  wholly  owned
     subsidiary of the Company  acquired all of the outstanding  common stock of
     Platinum.  As a result of the lack of development of the Platinum  business
     and to focus the  Company's  resources  on its core  business,  in December
     2003, the Company decided to close the operations of Platinum. Accordingly,
     the assets and  liabilities  of  Platinum  are  presented  as  discontinued
     operations for both the current and prior period. At September 30, 2007 and
     December 31, 2006,  liabilities of the  discontinued  operation  consist of
     loans and accounts payable of $14,000 and $37,000, respectively.

                                                                               9
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006



7.   Accounts Receivable and Revolving Loans

     On May 31, 2007, the Company renewed an Accounts  Receivable Line of Credit
     with a Bank, whereby the Company from time to time may assign some of their
     accounts  receivable  to the Bank on a full recourse  basis.  Upon specific
     invoice  approval,  an  advance  of  80% of the  underlying  receivable  is
     provided to the Company.  The remaining balance (20%), less finance charges
     equal to the prime rate plus 2.00% per month (currently  9.75%), is paid to
     the Company once the customer has paid.  The maximum amount of all assigned
     receivables  outstanding  at any time shall not exceed  $1.5  million.  The
     Company  paid a facility  fee of $15,000 for the renewal and the  agreement
     expires on May 30, 2008.  At September  30, 2007,  the Company had assigned
     approximately  $426,000 of  accounts  receivable  to the Bank and  received
     advances  of  $341,000.  At December  31,  2006,  the Company had  assigned
     approximately  $290,000 of  accounts  receivable  to the Bank and  received
     advances of $232,000 from the Bank.

     In May 2004,  the Company  entered into an Agreement with DIRI Rec Fund LLC
     (the "Rec Fund") whereby the Company may assign certain accounts receivable
     on a full recourse basis to the Rec Fund as security for advances  (loans).
     The Rec Fund was  established  solely to advance  funds to the Company upon
     the  assignment of  receivables.  The Rec Fund is  administered  by a third
     party trustee. Certain shareholders of the Company and a former Director of
     the  Company,  are the  principal  investors  in the Rec  Fund.  Under  the
     Agreement,  the  Company  pays  interest at the rate of one (1) percent per
     month on the maximum  purchase  amount (as defined in the agreement) of the
     Rec  Fund  and  pays  the  administrative  costs  of  the  Rec  Fund  which
     approximate  $12,000 per year. At September 30, 2007 and December 31, 2006,
     the Rec Fund had a total  principal  available for advances of $250,000 and
     the  Company had  outstanding  advances at those dates from the Rec Fund of
     $249,000 resulting in an unused  availability under the agreement of $1,000
     at such dates.

8.   Debt

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

     At  September  30, 2007 and December 31,  2006,  notes  payable  consist of
     $238,000 and  $183,000,  respectively,  of  borrowings  for the purchase of
     equipment.  These notes bear  interest at rates ranging from 8.8% to 10.25%
     per year and mature through April 2011. The notes are collateralized by the
     equipment  purchased  with net book values of  $213,000  and  $178,000,  at
     September 30, 2007 and December 31, 2006, respectively.

     Lines of credit
     ---------------

     On June 30, 2005,  the Company  obtained a line of credit in the  principal
     amount of $500,000  with JPMC  evidenced by a Grid Demand  Promissory  Note
     (the "Credit  Facility)  replacing a prior credit  facility  dated June 27,
     2003,  under  substantially  similar  terms,  but  extending  the  original
     Maturity Date to June 30, 2007.  As a condition  precedent to providing the
     Credit Facility,  the JPMC required guarantees of the Company's obligations
     from Tall Oaks Group  L.L.C.  ("Tall  Oaks") and  Lawrence  Hite  (managing
     member  of Tall  Oaks)  and a  collateral  agreement  from  Tall  Oaks.  In
     consideration  of the  issuance  of  such  guarantee  and  delivery  of the
     collateral agreement, on July 12, 2005, the Company issued and delivered to
     Tall Oaks  warrants  with an initial  exercise  price of $1.00 per share to
     purchase an aggregate of 500,000 shares of the common stock of Company.


                                                                              10
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006



     The credit facility  permitted two forms of draw down; one based upon prime
     rate,  the  second  based  upon  LIBOR.  The  Company  elected to draw down
     $500,000 applying the terms and conditions set forth for LIBOR. At December
     31, 2006, the balance outstanding was $500,000.  The credit line was repaid
     in full on June 28, 2007 and the credit line was terminated.

     Also in 2003, the Company  obtained,  and fully drew upon, a second line of
     credit from Sterling  National Bank ("Sterling") in the amount of $250,000.
     At December 31, 2006 the balance  outstanding under this line of credit was
     $86,000.  The line was repaid in full on  February  21, 2007 and the credit
     line was terminated.

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

     The Company has  equipment  under  capital  lease  obligations  expiring at
     various times through 2008. The assets and liabilities under capital leases
     are  recorded  at the  lower of the  present  values of the  minimum  lease
     payments or the fair values of the assets. The interest rates pertaining to
     these capital leases range from 10.2% to 19.2%.  At September 30, 2007, the
     gross and net book value of the related  assets is  approximately  $120,000
     and $19,000,  respectively.  At December  31, 2006,  the gross and net book
     value  of the  related  assets  was  approximately  $414,000  and  $66,000,
     respectively.


9.   Shareholders' Deficiency

     The following table summarizes the changes in shareholders'  deficiency for
     the nine months ended September 30, 2007:
<TABLE>
<CAPTION>
                     -------------------------------------------------- --------------------
                                                                               In thousands
                     -------------------------------------------------- --------------------
                            <S>                                                 <C>
                            Balance - January 1, 2007                           $ (3,899)
                     -------------------------------------------------- --------------------
                              Dividends accrued                                     (658)
                     -------------------------------------------------- --------------------
                              Reclassification of warrant liability                  602
                     -------------------------------------------------- --------------------
                              Stock based compensation                               111
                     -------------------------------------------------- --------------------
                              Shares issued for services                             709
                     -------------------------------------------------- --------------------
                              Exercise of stock options                               28
                     -------------------------------------------------- --------------------
                              Net income                                           1,542
                                                                               ----------
                     -------------------------------------------------- --------------------
                            Balance - September 30, 2007                        $ (1,565)
                     -------------------------------------------------- --------------------
</TABLE>
     Common Stock and Option Issuances
     ---------------------------------

     During the nine months ended  September 30, 2007, the Company issued 80,000
     options to employees to purchase  common  stock.  The options have exercise
     prices ranging from $0.61 to $0.95 (the trading prices of the shares at the
     date of the  grant)  and a fair  value at the grant  date of  $29,000.  The
     valuation  was  determined  using  the   Black-Scholes   method.   The  key
     assumptions used were an expected volatility based on historical volatility
     of 69.0% to 76.7% with a weighted  average  volatility  of 71.7%,  dividend
     rate of 0%, a risk free rate of 3.9% to 4.9% and an  expected  life of 3.25
     years using the simplified  method to determine  expected life.  During the
     nine  months  ended  September  30,  2006,  the Company  issued  options to
     purchase  360,000 common shares to certain  employees.  The options have an
     exercise  price of $0.25 per share (the trading  price of the shares at the
     date of the  grant)  and a fair  value at the grant  date of  $48,000.  The

                                                                              11
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006



     valuation  was  determined  using  the   Black-Scholes   method.   The  key
     assumptions  used were an expected  volatility of 73.7% based on historical
     volatility,  a risk free  interest  rate of 4.9% and expected  life of 3.25
     years using the simplified method for determining expected life. During the
     nine months ended September 30, 2007 and 2006 the Company recorded $111,000
     and  $136,000  of  compensation  expense  related  to the  vesting of stock
     options.

     During the nine months ended  September 30, 2007, the Company issued 88,740
     shares valued at $44,000 for settlement of accrued  directors' fees, 18,720
     shares valued at $10,000 and 11,217 shares valued at $16,000 to an employee
     for accrued  compensation  for the previous  year and for services in 2007,
     respectively,  and 659,618 shares valued at $306,000 to certain  employees,
     executives and former employees for accrued  compensation related to salary
     reductions in 2005 and 2006.  The Company also issued 140,000 shares valued
     at $315,000  based on the closing  market price on the date of the grant to
     the Chief Executive Officer for compensation under his employment agreement
     (see Note 12). The Company also amended its employment  agreements with its
     Chief  Operating  Officer and Chief  Technology  Officer which included the
     granting of 5,000  restricted  common shares each month from August 1, 2008
     through  December 31, 2010 for each of these  employees  (see Note 12). The
     Company  valued the shares at $652,000 based on the closing market price on
     the date of grant and will amortize the compensation  expense over the term
     of the employment  agreement.  The Company recorded compensation expense of
     $16,000  related  to the  restricted  stock  grants  to it Chief  Operating
     Officer and Chief Technology Officer during the nine months ended September
     31, 2007.  During the nine months  ended  September  30, 2006,  the Company
     issued  49,944  shares of common  stock valued at $22,000 to an employee as
     compensation,  and 64,729 shares valued at $24,000 as partial settlement of
     a consulting agreement.

     Also,  during the nine months ended  September 30, 2007, the Company issued
     646,176  shares on exercise of  warrants  and 95,772  shares on exercise of
     options.  The warrant  exercise was done on a cashless  basis.  The Company
     received proceeds of $28,000 from the exercise of 25,000 options and 70,772
     shares were issued on the cashless exercise of options.

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

     The Company  displays  earnings per share in accordance  with SFAS No. 128,
     "Earnings Per Share".  SFAS No. 128 requires dual presentation of basic and
     diluted  earnings per share ("EPS").  Basic EPS includes no dilution and is
     computed by dividing net income (loss)  attributable to common shareholders
     by the weighted average number of common shares outstanding for the period.
     Diluted EPS includes the potential  dilution that could occur if securities
     or other  contracts to issue common stock were  exercised or converted into
     common stock. Outstanding stock options, warrants and other potential stock
     issuances have not been included in the computation  where the effect would
     be  anti-dilutive.  The  following  table  presents  the shares used in the
     computation  of fully  diluted  earnings  per  share for the three and nine
     month periods ended September 30, 2007:
<TABLE>
<CAPTION>
        ------------------------------------------------------ --------------------------- --------------------------
                                                                   Three Months Ended          Nine Months Ended
                                                                   September 30, 2007         September 30, 2007
        ------------------------------------------------------ --------------------------- --------------------------
                                                                     (in thousands)             (in thousands)
        ------------------------------------------------------ --------------------------- --------------------------
               <S>                                                      <C>                         <C>
               Common shares outstanding                                6,082                       5,650
        ------------------------------------------------------ --------------------------- --------------------------
               Warrants to purchase common stock                        1,164                       1,152
        ------------------------------------------------------ --------------------------- --------------------------
               Options to purchase common stock                         1,768                       1,334
                                                                        -----                       -----
        ------------------------------------------------------ --------------------------- --------------------------
               Total fully diluted shares                               9,014                       8,136
                                                                        =====                       =====
        ------------------------------------------------------ --------------------------- --------------------------
</TABLE>
                                                                              12
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006



     Securities that could potentially dilute basic EPS in the future, that were
     not included in the  computation  of the diluted EPS because to do so would
     have been anti-dilutive for the periods presented, consist of the following
     (in thousands):
<TABLE>
<CAPTION>
                                                    Three Months Ended                     Nine Months Ended
                                                    ------------------                     -----------------
                                                       September 30,                          September 30,
                                                       -------------                          -------------
                                                    2007            2006                 2007               2006
                                                    ----            ----                 ----               ----
     <S>                                           <C>             <C>                  <C>                <C>
     Options to purchase common stock                445           4,604                  445              4,604
     Warrants to purchase common stock               200           3,332                  200              3,332
     Series A Convertible preferred stock          1,347           1,347                1,347              1,347
                                                   -----           -----                -----              -----

           Total potential common shares           1,992           9,283                1,992              9,283
                                                   =====           =====                =====              =====
</TABLE>
10.  Products and Services

     The Company and its subsidiaries  currently operate in one business segment
     and provide two separate  products:  ASP  services  and custom  engineering
     services. The following table displays revenue by product (in thousands):
<TABLE>
<CAPTION>

                                             Three Months Ended               Nine Months Ended
                                             ------------------               -----------------
                                                September 30,                    September 30,
                                             ------------------               -----------------
                                           2007             2006               2007           2006
                                           ----             ----               ----           ----
      <S>                                 <C>           <C>                   <C>            <C>
      ASP IOL fees                        $2,035        $   1,715             $ 5,594        $4,846
      Custom engineering fees                547              470               1,822         1,550
                                          -------         --------             ------         ------

           Total Revenue                  $2,582           $2,185              $7,416        $6,396
                                         =======         ========             =======        ======
</TABLE>
     Major Customers
     ---------------

     For the  three  and nine  month  periods  ended  September  30,  2007,  IBM
     accounted for 48.8% and 49.1% of revenue,  respectively,  compared to 67.5%
     and 68.5% for the three and nine month  periods  ended  September 30, 2006,
     respectively.  For the three and nine month  periods  ended  September  30,
     2007, EDS accounted for 48.5% and 47.6% of revenue, respectively,  compared
     to 30.8% and 29.5% for the three and nine month periods ended September 30,
     2006,  respectively.  Accounts  receivable from these customers amounted to
     $1,613,000  and  $1,937,000  at  September  30, 2007 and December 31, 2006,
     respectively.

11.  Management's Liquidity Plans

     In  order  to meet  the  Company's  cash  needs  and to  maintain  positive
     operating  cash flows the  Company has and will  continue  to take  various
     actions and steps that the Company  believes will enable it to attain these
     goals. These actions include:

          o    For the nine months ended  September  30, 2007 and the year ended
               December 31, 2006 the Company had net cash provided by continuing
               operations  of  $2,330,000  and  $1,176,000,   respectively.  The
               Company  will  continue  to  monitor  and  control  expenses  and
               anticipates  that it will continue to achieve positive cash flows
               from operations.

                                                                              13
<PAGE>

                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006



          o    The Company may raise  additional  capital through private equity
               offerings and borrowing.  There is no assurance however that such
               capital would be available to the Company,  or if  available,  on
               terms and conditions that would be acceptable to the Company. The
               Company  does not  anticipate  raising  any  capital  from  these
               sources in the next 12 months.

          o    The  Company  continues  to strive to  increase  revenue  through
               offering  custom  engineering  services,  expanding and enhancing
               existing  product  offerings  such as IOL,  and  introducing  new
               product offerings.  In the nine months of 2007 the Company signed
               an  agreement  with two new  customers  to provide IOL  services.
               Management  anticipates  that  revenue  from new  customers  will
               continue  to  increase  in 2007 and beyond and expects to further
               broaden our customer base in 2007, although there is no assurance
               that the Company  will be able to further  broaden  its  customer
               base.

          o    In 2006 the  Company  initiated  a cost  reduction  plan that has
               significantly  reduced  operating  costs while still enabling the
               Company to meet its  commitments to its  customers.  For the nine
               months  ended  September  30,  2007,  operating  costs  decreased
               $387,000, or 6.3% compared to operating costs for the nine months
               ended  September 30, 2006.  During this period revenue  increased
               $1,020,000  (15.9%)  compared  to the same  period  in 2006.  The
               Company will continue to seek ways to control and reduce costs.

          o    The Company continues to expand its marketing efforts in order to
               increase the customer base. In this regard,  the Company became a
               business partner with IBM and through this relationship will work
               with IBM to achieve  sales to new  customers.  The  Company  will
               continue to pursue similar channel partner opportunities.

     Management believes that these plans and new initiatives as discussed above
     will lead to continued  positive  cash flows and  profitability.  While the
     Company  pursues  these goals the Company also believes that its ability to
     generate  positive cash flows from operations will provide  sufficient cash
     to meet cash requirements at least through September 30, 2008. There can be
     no  assurance,  however,  that the Company  will  achieve the cash flow and
     profitability  goals, or that it will be able to raise  additional  capital
     sufficient  to meet  operating  expenses or  implement  its plans.  In such
     event,  the Company may have to revise its plans and  significantly  reduce
     its operating  expenses,  which could have an adverse effect on revenue and
     operations in the short term.

12.  Commitments and Contingencies

     Employment Agreements
     ---------------------

     On August 22, 2007, the Board ratified and approved the Services  Agreement
     with  its  Chairman  and  Chief  Executive  Officer,  James  A.  Cannavino,
     effective  June 1,  2007  for a term  ending  on  December  31,  2010.  The
     agreement calls for  compensation of $20,000 per month (with a 10% increase
     on  each  annual   anniversary   subject  to  approval  of  the   Company's
     Compensation Committee and based on performance of the Company), a one-time
     grant of 100,000  shares of  restricted  common  stock and the  granting of
     10,000  shares of  restricted  common stock per month  commencing  with the
     execution of the Agreement  and ending on December 1, 2010.  The fair value
     of the stock grants is $1,193,000  based on the closing price of the shares

                                                                              14
<PAGE>

                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006



     on the grant date.  During the three months ended  September 30, 2007,  the
     Company issued 140,000 shares valued at $268,000 as compensation related to
     the services agreement.  The agreement further provides for:  reimbursement
     of certain expenses;  living and travel expenses  approximating $11,000 per
     month; and certain severance  benefits in the event of termination prior to
     the expiration date.

     On August 22,  2007,  the Board  ratified  and approved an amendment to the
     Services  Agreement with its Executive  Vice President and Chief  Operating
     Officer,  Matthew E. Oakes,  for a term ending on December  31,  2010.  The
     agreement calls for compensation of $15,500 per month, a $25,000 cash bonus
     paid upon execution of the  Agreement,  and the granting of 5,000 shares of
     restricted  common stock per month  commencing on August 1, 2008 and ending
     on December 31, 2010.  The fair value of the stock grants is $326,000 based
     on the closing price of the shares on the grant date. The agreement further
     provides for  reimbursement of certain  expenses and severance  benefits in
     the event of termination prior to the expiration date.

     On August 22,  2007,  the Board  ratified  and approved an amendment to the
     Services  Agreement with its Executive Vice President and Chief  Technology
     Officer,  Arnold P. Leap,  for a term  ending on  December  31,  2010.  The
     agreement calls for compensation of $16,500 per month, a $25,000 cash bonus
     paid upon execution of the  Agreement,  and the granting of 5,000 shares of
     restricted  common stock per month  commencing on August 1, 2008 and ending
     on December 31, 2010.  The fair value of the stock grants is $326,000 based
     on the closing price of the shares on the grant date. The agreement further
     provides for  reimbursement of certain  expenses and severance  benefits in
     the event of termination prior to the expiration date.


13.  New Accounting Pronouncements

     In June  2006,  the FASB  issued  Interpretation  No. 48,  "Accounting  for
     Uncertainty in Income Taxes - an  interpretation of FASB Statement No. 109"
     ("FIN 48").  This  Interpretation  prescribes a  recognition  threshold and
     measurement   attribute  for  the  financial   statement   recognition  and
     measurement  of a tax  position  taken  or  expected  to be  taken in a tax
     return,  and provides guidance on derecognition,  classification,  interest
     and penalties,  accounting in interim periods,  disclosure, and transition.
     This  Interpretation is effective for fiscal years beginning after December
     15,  2006.  The  adoption  of FIN 48 did not have a material  effect on the
     consolidated financial position, results of operations or cash flows of the
     Company (see Note 4).

     In  September  2006,  the FASB issued  Statement  of  Financial  Accounting
     Standards  No.  157,  "Fair  Value  Measurements"  ("SFAS  157").  SFAS 157
     clarifies the principle that fair value should be based on the  assumptions
     market  participants  would  use when  pricing  an asset or  liability  and
     establishes a fair value hierarchy that prioritizes the information used to
     develop those assumptions.  SFAS 157 requires fair value measurements to be
     separately disclosed by level within the fair value hierarchy.  SFAS 157 is
     effective for financial  statements issued for fiscal years beginning after
     November 15, 2007,  and interim  periods  within  those fiscal  years.  The
     Company is  currently  evaluating  the impact of  adopting  SFAS 157 on its
     future  consolidated  financial  position,  results of operations  and cash
     flows and has not yet determined such effects.


     In November  2006,  the EITF  reached a final  consensus in EITF Issue 06-6
     "Debtor's  Accounting for a Modification  (or Exchange) of Convertible Debt
     Instruments"  ("EITF  06-6").  EITF 06-6  addresses the  modification  of a
     convertible  debt  instrument  that  changes  the fair value of an embedded
     conversion  option and the subsequent  recognition of interest  expense for
     the associated debt instrument when the  modification  does not result in a

                                                                              15
<PAGE>

                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006



     debt  extinguishment  pursuant to EITF 96-19 , "Debtor's  Accounting  for a
     Modification  or Exchange of Debt  Instruments,".  The consensus  should be
     applied to  modifications  or  exchanges of debt  instruments  occurring in
     interim or annual periods  beginning  after November 29, 2006. The adoption
     of EITF 06-6 did not have a material impact on our  consolidated  financial
     position, results of operations or cash flows.


     In  November  2006,  the  FASB  ratified  EITF  Issue  No.  06-7,  Issuer's
     Accounting for a Previously  Bifurcated  Conversion Option in a Convertible
     Debt Instrument When the Conversion  Option No Longer Meets the Bifurcation
     Criteria in FASB Statement No. 133,  Accounting for Derivative  Instruments
     and Hedging Activities ("EITF 06-7"). At the time of issuance,  an embedded
     conversion  option in a convertible  debt  instrument may be required to be
     bifurcated  from the debt  instrument  and accounted for  separately by the
     issuer as a  derivative  under FAS 133,  based on the  application  of EITF
     00-19. Subsequent to the issuance of the convertible debt, facts may change
     and cause the embedded  conversion  option to no longer meet the conditions
     for  separate  accounting  as a  derivative  instrument,  such as when  the
     bifurcated  instrument meets the conditions of Issue 00-19 to be classified
     in  stockholders'  equity.  Under EITF 06-7,  when an  embedded  conversion
     option  previously  accounted  for as a derivative  under FAS 133 no longer
     meets the  bifurcation  criteria  under  that  standard,  an  issuer  shall
     disclose a  description  of the  principal  changes  causing  the  embedded
     conversion  option to no longer require  bifurcation  under FAS 133 and the
     amount  of  the  liability  for  the  conversion  option   reclassified  to
     stockholders'  equity.  EITF  06-7  should  be  applied  to all  previously
     bifurcated  conversion  options in  convertible  debt  instruments  that no
     longer  meet the  bifurcation  criteria  in FAS 133 in  interim  or  annual
     periods  beginning after December 15, 2006,  regardless of whether the debt
     instrument  was entered into prior or subsequent  to the effective  date of
     EITF 06-7.  Earlier  application  of EITF 06-7 is  permitted in periods for
     which financial  statements have not yet been issued.  The adoption of EITF
     06-7 did not have a material impact on our consolidated financial position,
     results of operations or cash flows.

     In December 2006, the FASB issued FASB Staff Position  ("FSP") EITF 00-19-2
     "Accounting for  Registration  Payment  Arrangements"  ("FSP EITF 00-19-2")
     which  specifies that the contingent  obligation to make future payments or
     otherwise transfer  consideration under a registration  payment arrangement
     should be separately recognized and measured in accordance with SFAS No. 5,
     "Accounting for  Contingencies."  Adoption of FSP EITF 00-19-02 is required
     for fiscal years  beginning after December 15, 2006. The affect of adopting
     FSP EITF 00-19-2 are disclosed in Note 3.

     In February  2007,  the FASB issued SFAS No. 159 "The Fair Value Option for
     Financial Assets and Financial Liabilities - Including an amendment of FASB
     Statement  No. 115" ("SFAS No. 159"),  which permits  entities to choose to
     measure many financial  instruments  and certain other items at fair value.
     The fair value option established by this Statement permits all entities to
     choose to measure eligible items at fair value at specified election dates.
     A business  entity  shall report  unrealized  gains and losses on items for
     which the fair value option has been elected in earnings at each subsequent
     reporting  date.  Adoption is required  for fiscal  years  beginning  after
     November 15,  2007.  Early  adoption is permitted as of the  beginning of a
     fiscal year that begins on or before November 15, 2007, provided the entity
     also  elects  to apply the  provisions  of SFAS No.  159.  The  Company  is
     currently  evaluating the expected  effect of SFAS 159 on its  consolidated
     financial  statements  and is currently  not yet in a position to determine
     such effects.

                                                                              16
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES




Item 2 - Managements Discussion and Analysis or Plan of Operations

Forward looking statements

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

Overview

Direct Insite Corp. and its  subsidiaries  (hereinafter  referred to at times as
"Direct Insite" or the "Company"), was organized under the name Unique Ventures,
Inc. as a public company,  under the laws of the State of Delaware on August 27,
1987.  In August,  2000,  we changed our name to Direct  Insite Corp.  which the
Board of Directors believed was more in line with our new direction.

Direct Insite operates as an application  service  provider  ("ASP"),  providing
best practice financial supply chain automation and workflow efficiencies within
the Procure-to-Pay (PTP) and Order-to-Cash (OTC) processes. Specifically, Direct
Insite's global eInvoice  Management  services  automate complex manual business
processes such as invoice  validation,  order matching,  consolidation,  dispute
handling, and e-payment processing in a Business to Business ("B2B") transaction
based "fee for service" business model.

Through  the  automation  and  workflow  of  Procure-to-Pay   and  Order-to-Cash
processes and the  presentation of invoices,  orders,  and attachment data via a
self  service  portal,  Direct  Insite is helping our  customers  reduce  manual
invoice-to-order  reconciliation  costs,  reduce the  frequency of inquiries and
disputes,  improve  cash flow,  increase  competitiveness  and improve  customer
satisfaction.

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.

Currently, IBM, our largest customer, representing approximately 48.8% and 49.1%
of our revenue for the three and nine month  periods  ended  September 30, 2007,
respectively and 67.5% and 68.5% of revenue for the three and nine month periods
ended September 30, 2006,  respectively,  utilizes our suite of IOL products and
services to allow  their  customers  from around the globe to receive,  analyze,
dispute and cost  allocate all of their  invoice  related  information  in their
local  language and currency via the Internet 24 hours a day, seven days a week,

                                                                              17
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                      DIRECT INSITE CORP. AND SUBSIDIARIES



365  days  a  year.  Electronic  Data  Systems  Corp.  ("EDS"),   accounted  for
approximately  48.5% and 47.6% of revenue  for the three and nine month  periods
ended  September 30, 2007,  respectively  and 30.8% and 29.5% of revenue for the
three and nine month periods ended September 30, 2006, respectively.

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 continual  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 Statement of Position 81-1,  issued by the
American  Institute of Certified  Public  Accountants  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,  in accordance  with the Emerging Issues
Task  Force  ("EITF")  Issue No.  00-21,  "Revenue  Arrangements  with  Multiple
Deliverables",  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 it does

                                                                              18
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES



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.

ASP Services
------------

We provide  transactional  data  processing  services  through our ASP  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  ASP
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 SOP 81-1,
"Accounting for  Performance of  Construction-Type  and Certain  Production Type
Contracts."

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

Cost of revenue in the 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, 2007 and
December 31, 2006, an allowance for doubtful  accounts is not provided since, in
the opinion of management, all accounts are deemed collectible.

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

Statement of Financial  Accounting  Standards ("SFAS"),  No. 144 "Accounting for
the Impairment or Disposal of Long-Lived Assets" ("FAS 144") 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 FAS 144
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 three and nine month periods
ended September 30, 2007 and 2006, respectively.

                                                                              19
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES




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

We currently have significant deferred tax assets. SFAS No. 109, "Accounting for
Income Taxes"("FAS 109"),  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, FAS 109 provides 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.  Accordingly, we recorded a full valuation allowance. In
addition, we expect to provide a full valuation allowance on future tax benefits
until we can sustain a level of profitability  that  demonstrates our ability to
utilize the assets, or other significant  positive evidence arises that suggests
our ability to utilize such assets.  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.

We adopted the Financial  Accounting  Standards Board's  Interpretation  No. 48,
"Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109" ("FIN 48"), effective January 1, 2007 as further described in Note 4 to
our condensed consolidated financial statements.

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

In preparing  consolidated  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,  the fair
value  of  derivative  warrants,  stock  based  compensation  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, 2007 we had operating
income of $544,000 and $1,647,000, respectively, compared to an operating income
of $416,000 and $240,000 for the three and nine months ended September 30, 2006,
respectively.  We had net income of $524,000  and  $1,542,000  for the three and
nine month periods ended  September  30, 2007,  respectively,  compared to a net
loss of  $93,000  and  $400,000  for the  three  and nine  month  periods  ended
September  30, 2006,  respectively.  The  significant  improvement  in operating
results  is due to an  increase  in  revenue  and  cost  reductions  as  further
discussed below.

For the three and nine month periods ended September 30, 2007 revenue  increased
$397,000   (18.2%)  to  $2,582,000   and   $1,020,000   (15.9%)  to  $7,416,000,
respectively, compared to revenue of $2,185,000 and $6,396,000 for the three and
nine month periods ended September 30, 2006, respectively. Revenue from our core
business,  recurring ASP IOL services,  increased  $320,000 (18.7%) and $748,000
(15.4%)  for the  three  and  nine  month  periods  ended  September  30,  2007,
respectively, compared to the same periods in 2006. This increase is principally
due to the expansion of our services to existing customers. Engineering services
revenue  increased  $77,000 (16.4%) and $272,000  (17.5%) for the three and nine
month  periods  ended  September  30, 2007,  respectively,  compared to the same
periods in 2006. The increase in the engineering  services revenue is the result
of further  expansion of our services to existing accounts and the addition of a
new customer.  We anticipate that revenue from ASP IOL services will increase as
we begin new initiatives at both IBM and EDS and as we expand our customer base.

Costs of  operations,  research and  development  increased by $59,000 (7.5%) to
$844,000 and  decreased  $145,000  (5.1%) to  $2,706,000  for the three and nine
month  periods  ended  September  30, 2007,  respectively,  compared to costs of

                                                                              20
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES




$785,000 and $2,851,000 for the three and nine month periods ended September 30,
2006,  respectively.  These costs  consist  principally  of salaries and related
expenses  for  software  developers,   programmers,  custom  engineers,  network
services,  and quality  control and assurance.  Also included are network costs,
costs of the production co-location facility and other expenses directly related
to our custom engineering and ASP production services. The increase in costs for
the three months ended  September 30, 2007 was principally due to an increase in
professional  fees for contract  developers of $89,000 and an increase in rental
costs for the co-location production facilities of $16,000, offset by a decrease
in salaries and benefits of $36,000,  while all other costs  decreased  $10,000.
The  decrease  in costs  for the nine  months  ended  September  30,  2007,  was
primarily  due to a decrease  in  salaries  and  related  costs of  $385,000,  a
decrease in rental costs of $74,000,  and a decrease in telephone  and data line
costs of  $26,000,  offset by an  increase  in  professional  fees for  contract
developers  of $297,000  and an increase in costs for  software  and supplies of
$40,000.  All other  costs  for the nine  month  period  increased  $3,000.  The
decrease  in  salaries  and  related  costs was due to staff  reductions  as the
Company began outsourcing some of its development activities.

Sales and marketing  costs  decreased  $51,000  (17.2%) and $236,000  (21.3%) to
$245,000 and $873,000 for the three and nine month periods  ended  September 30,
2007,  respectively,  compared to costs of $296,000 and $1,109,000 for the three
and nine month periods ended  September 30, 2006.  Personnel and related benefit
costs  decreased  $25,000  and  $249,000  for the  three and nine  months  ended
September 30, 2007, respectively, as a result of staff reductions. For the three
and nine months ended September 30, 2007,  professional  fees decreased  $26,000
and $16,000,  respectively. For the nine months ended September 30, 2007, travel
and  entertainment  costs increased  $26,000 while all other sales and marketing
costs  increased  $3,000.  We  anticipate  that sales and  marketing  costs will
increase  slightly  during the  remainder of 2007 as we invest in new  marketing
initiatives aimed at expanding our customer base.

General and  administrative  costs  increased  $259,000  (42.3%) to $871,000 and
decreased  $26,000  (1.3%) to  $1,931,000  for the three and nine month  periods
ended  September  30,  2007,  respectively,  compared to costs of  $612,000  and
$1,875,000  for the three and nine  month  periods  ended  September  30,  2006,
respectively.  Costs for the three months  ended  September  30, 2007  increased
principally  due to an  increase of  $396,000  in  salaries  and  related  costs
including stock based  compensation  costs.  This increase  included a charge of
$315,000 for the fair value of stock granted to the Chief  Executive  Officer as
provided in his employment agreement (see Note 12 to the Condensed  Consolidated
Financial  Statements).  This was offset by a  decrease  in  directors'  fees of
$44,000,  a decrease in legal and  accounting  fees of $40,000 and a decrease in
travel and entertainment costs of $37,000.  All other general and administrative
costs  decreased   $16,000  for  the  quarter.   The  decrease  in  general  and
administrative  costs for the nine months ended September 30, 2007 was due to an
increase in salaries and related costs of $320,000 offset by a decrease in legal
and accounting  fees of $126,000,  a decrease of $117,000 in directors'  fees, a
decrease  of  $66,000  in rent  expense  and a decrease  in  insurance  costs of
$25,000.  Legal and accounting fees decreased principally due to higher costs in
2006  related to costs  incurred  in filing a  registration  statement  in 2006.
Directors'  fees decreased as a result of fewer Board and Committee  meetings in
2007 compared to 2006.  All other  general and  administrative  costs  decreased
$12,000 for the nine months ended September 30, 2007.

Depreciation and amortization expense increased $2,000 (2.6%) and $20,000 (8.4%)
for the three and nine months ended September 30, 2007,  respectively,  compared
to the same periods in 2006, due to the acquisition of new computer equipment.

Net interest expense decreased $190,000 (90.5%) and $457,000 (84.2%) principally
due to the  amortization  of debt discount of $222,000 in the first half of 2006
which was fully  amortized in 2006, and a decrease in interest due to lower rate
of  borrowing  under our  receivables  financing  agreements  and  repayment  of
outstanding  bank lines of credit  during the nine months  ended  September  30,
2007.

                                                                              21
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES



Other income was $0 and $8,000 for the three and nine months ended September 30,
2007  compared to other  expense,  net of $45,000 and $112,000 for the three and
nine month periods ended September 30, 2006, respectively. In 2007 we had $8,000
of income from the sale of an investment. In 2006 the Company incurred penalties
in connection  with the Sigma Capital bridge  financing.  Also for the three and
nine month  periods  ended  September  30, 2006 we had  expense of $254,000  and
income of $15,000,  respectively, due to the marked to market adjustment for the
fair value of the  warrant  liability  recorded  in  connection  with the bridge
financing. The bridge financing was repaid in 2006.

Financial Condition and Liquidity

For the nine months ended  September  30, 2007,  we had net income of $1,542,000
compared to a net loss of $400,000 for the same period in 2006. Cash provided by
operating activities was $2,307,000 in the first nine months of 2007 compared to
cash  provided by operating  activities of $895,000 for the same period in 2006,
an improvement of $1,412,000.  This significant improvement is the result of the
increased revenue and lower operating costs as discussed above.

Cash provided by operating  activities  for the nine months ended  September 30,
2007 consisted of the net income of $1,542,000,  increased by non-cash  expenses
of $718,000,  including  depreciation and amortization of property and equipment
of $259,000, and stock-based compensation expense of $458,000,  offset by a gain
on the  sale of an  investment  of  $8,000.  In  addition,  accounts  receivable
decreased  by  $320,000,  prepaid  expenses  decreased  $14,000 and other assets
decreased $3,000,  while accounts payable and accrued expenses decreased $37,000
and  deferred  revenue  decreased  $221,000.  Cash  used  to  repay  debt of the
discontinued operations was $23,000.

Cash used in  investing  activities  was  $122,000 net for the nine months ended
September  30,  2007,  compared  to $73,000  for same  period in 2006.  This was
principally  expenditures  for equipment of $130,000 offset by proceeds from the
sale of an investment of $8,000.

Cash used in  financing  activities  totaled  $547,000 for the nine months ended
September  30, 2007,  compared to cash used in financing  activities of $482,000
for the nine months ended  September  30, 2006.  We repaid  $99,000 of long-term
debt and  capital  lease  obligations  in the first nine  months of 2007 and the
balance  outstanding under short term revolving loans for receivables  financing
increased by $110,000 in 2007. We also repaid lines of credit of $586,000 during
the first nine months of 2007. Additionally,  we received proceeds of $28,000 on
the exercise of stock options.

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.

Management's Liquidity and Financing Plans

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

     o    For the nine  months  ended  September  30,  2007  and the year  ended
          December 31, 2006 we had net cash provided by continuing operations of
          $2,330,000 and $1,176,000,  respectively.  We will continue to monitor
          and  control  expenses  and we  anticipate  that we will  continue  to
          achieve positive cash flows from operations.

     o    We may raise  additional  capital through private equity offerings and

                                                                              22
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES



          borrowing.  There is no assurance  however that such capital  would be
          available to us, or if available,  on terms and conditions  that would
          be  acceptable  to us. We do not  anticipate  raising any capital from
          these sources in the next 12 months.

     o    We continue  to strive to increase  revenue  through  offering  custom
          engineering   services,   expanding  and  enhancing  existing  product
          offerings such as IOL, and introducing new product  offerings.  In the
          nine months of 2007,  we signed  agreements  with two new customers to
          provide IOL services.  We  anticipate  that revenue from new customers
          will  continue to increase in 2007 and beyond and we expect to further
          broaden our customer base in 2007, although there is no assurance that
          we will be able to further broaden our customer base.

     o    In 2006 we  initiated  a cost  reduction  plan that has  significantly
          reduced   operating   costs  while  still  enabling  us  to  meet  our
          commitments to our customers.  For the nine months ended September 30,
          2007,  operating  costs  decreased  $387,000,   or  6.3%  compared  to
          operating costs for the nine months ended  September 30, 2006.  During
          this period revenue increased  $1,020,000 (15.9%) compared to the same
          period in 2006.  We will  continue  to seek ways to control and reduce
          costs.

     o    We continue to expand our  marketing  efforts in order to increase our
          customer base. In this regard,  we became a business  partner with IBM
          and through this  relationship  will work with IBM to achieve sales to
          new  customers.  We will continue to pursue  similar  channel  partner
          opportunities.

     We believe that these plans and new  initiatives  as  discussed  above will
lead to continued positive cash flows and  profitability.  While we pursue these
goals we also  believe  that our  ability to generate  positive  cash flows from
operations will provide  sufficient cash to meet our cash  requirements at least
through  September 30, 2008.  There can be no assurance,  however,  that we will
achieve our cash flow and profitability  goals, or that we will be able to raise
additional capital sufficient to meet operating expenses or implement our plans.
In such  event,  we may  have to  revise  our  plans  and  significantly  reduce
operating expenses, which could have an adverse effect on revenue and operations
in the short term.

Item 3- 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.  The  Company's  Chief  Executive  and Chief  Financial
Officers are  responsible  for  establishing,  maintaining  and enhancing  these
procedures.  They are also responsible,  as required by the rules established by
the SEC, for the evaluation of the effectiveness of these procedures.

     Based  on  their  evaluation  of  the  Company's  disclosure  controls  and
procedures  which took  place as of  September  30,  2007,  the Chief  Executive
Officer and the Chief Financial  Officer believe that these  procedures were not
effective as a result of limited  resources and a limited  segregation of duties
in  accounting  and  financial  reporting.  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  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

                                                                              23
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES




reports and the Company  expects that this will  continue  until there is a need
for and financial  resources permit engaging  additional  accounting  staff. The
Company  has not  determined  at this time when such  additional  staff  will be
employed.

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
accepted  accounting  principles  generally  accepted  in the  United  States of
America,  and (2)  maintain  accountability  for  assets.  Access  to  assets is
permitted   only  in   accordance   with   management's   general  or   specific
authorization.  The Company is a small business  issuer and therefore is not yet
subject to the evaluation of internal control requirements of Section 404 of the
Sarbanes-Oxley  Act of 2002 (the "Act") and  therefore is not yet subject to the
reporting  requirements of Regulation S-B, Items 308(a) and (b), and, therefore,
has not fully complied with these requirements. The Company is required to be in
compliance  with  Section 404 of the Act and report  thereon for the fiscal year
ended  December  31,  2007 and in this  regard  has begun to  develop a plan for
compliance  and has engaged  outside  consultants  to assist with the design and
implementation of this plan.

During the period  covered by this  report and since the date of the most recent
evaluation of the Company's  internal  controls over financial  reporting by the
Chief Executive and Chief Financial Officers, there have been no changes in such
controls  or in  other  factors  that  could  have  materially  affected,  or is
reasonably likely to materially affect, those controls, including any corrective
actions with regard to significant deficiencies and material weaknesses.

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, under standards established by the
American Institute of Certified Public  Accountants.  The reportable  conditions
and material weakness relate to limited segregation of duties and the absence of
reviews and approvals  beyond that performed by the Chief  Financial  Officer of
transactions  and  accounting  entries.  Given these  reportable  conditions and
material  weaknesses,  as described above,  the Chief Financial  Officer devoted
additional  time to closing,  preparing  and  reviewing  the report for the nine
months ended September 30, 2007.


                                                                              24
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

                           PART II - OTHER INFORMATION





Item 1. Legal Proceedings

     None

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

     On September 19, 2007, in connection with the Services Agreement,  dated as
     of June 1, 2007, by and between  Direct  Insite Corp.  and its Chairman and
     Chief  Executive  Officer,  James A.  Cannavino,  the Company issued to Mr.
     Cannavino  140,000  shares of restricted  common stock.  The  consideration
     received by the Company for these  issuances  are Mr.  Cannavino's  ongoing
     services to the Company as set forth in the Services  Agreement.  We issued
     the  unregistered  securities  in  reliance on the  exemptions  provided by
     Section 4(2) of the  Securities Act as a transaction  not involving  public
     offerings.

Item 3. Defaults Upon Senior Securities

     None

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

     None

Item 5. Other Information

     None

Item 6. Exhibits


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

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

                                                                              25


<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 7, 2007



/s/ Michael J. Beecher
--------------------------------------------
Michael J. Beecher, Chief Financial Officer                November 7, 2007

                                                                              26