DIRECT INSITE CORP. AND SUBSIDIARIES

                                      INDEX
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                    FORM 10-Q
                                   (Mark One)

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

                  For the quarterly period ended March 31, 2008

                                       OR

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

                 For the transition period from ______ to ______

                          Commission File No. 0 - 20660


                               DIRECT INSITE CORP.
             (Exact name of registrant as specified in its Charter)

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

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


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

Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

        Yes   X    No

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

      Large accelerated filer [ ]           Accelerated filer [  ]

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

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

The number of shares of $.0001 par value  stock  outstanding  as of May 10, 2008
was: 7,297,898.
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

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

     Item 1. Financial Statements.

     Condensed Consolidated Balance Sheets as of March 31, 2008 (Unaudited) and
       December 31, 2007 .................................................................................        3
     Condensed Consolidated Statements of Operations
       For the Three Months Ended March 31, 2008 and 2007 (Unaudited).....................................        4

     Condensed Consolidated Statements of Cash Flows
       For the Three Months Ended March 31, 2008 and 2007 (Unaudited).....................................        5

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

     Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .......       14

      Item 3. Quantitative and Qualitative Disclosures About Market Risk..................................       19

      Item 4T. Controls and Procedures....................................................................       19

PART II - OTHER INFORMATION

     Item 1. Legal Proceedings ...........................................................................       21

     Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..................................       21

     Item 3. Defaults Upon Senior Securities .............................................................       21

     Item 4.  Submission of Matters to a Vote of Security Holders ........................................       21

     Item 5. Other Information ...........................................................................       21

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

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


CERTIFICATIONS                                                                                                Exhibits
</TABLE>
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                   AS OF MARCH 31, 2008 AND DECEMBER 31, 2007
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                    March 31,           December 31,
                                                                                      2008                 2007
                                                                              --------------------- --------------------
                                                                                  (Unaudited)
<S>                                                                           <C>                   <C>
ASSETS
Current assets
  Cash and cash equivalents                                                   $           1,476    $            2,184
  Accounts receivable, net of allowance for doubtful accounts of
   $0 in 2008 and 2007                                                                    1,597                 1,486
  Prepaid expenses and other current assets                                                 142                   135
                                                                              ------------------   --------------------

       Total current assets                                                               3,215                 3,805

Property and equipment, net                                                                 457                   443
Deferred tax asset                                                                        2,867                    --
Other assets                                                                                273                   274
                                                                              ------------------   --------------------

         TOTAL ASSETS                                                         $           6,812     $           4,522
                                                                               ================     ===================

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
  Accounts payable and accrued expenses                                       $           1,637     $           1,839
  Current portion of capital lease obligations                                               28                    36
  Current portion of notes payable                                                          100                    84
  Dividends payable                                                                       2,736                 3,336
  Deferred revenue                                                                          217                   123
                                                                              ------------------   --------------------

       Total current liabilities                                                          4,718                 5,418

Capital lease obligations, net of current portion                                            11                    14
Notes payable, net of current portion                                                       159                   135
                                                                              ------------------   --------------------

       Total liabilities                                                                  4,888                 5,567
                                                                              ------------------   --------------------

Commitments and contingencies

Shareholders' equity (deficiency)
  Preferred stock, $0.0001 par value; 2,000,000 shares authorized;
     Series A Convertible Preferred, 134,680 issued and outstanding
     in 2008 and 2007; liquidation preference of $2,750,000;
     Series B Redeemable Preferred, 974 shares issued and outstanding in                      -                     -
     2008 and 2007; liquidation preference of $974,075;
     Series C Redeemable Preferred, 2,000 shares issued and outstanding                       -                     -
     in 2008 and 2007; liquidation preference of $2,000,000;
     Series D Redeemable Preferred, 100 shares issued and outstanding
     in 2008 and 2007; liquidation preference of $100,000.
  Common stock, $0.0001 par value; 50,000,000 shares authorized;
  7,308,000 and 7,115,216 shares issued in 2008 and 2007, respectively;
  and 7,268,073 and 7,075,289 shares outstanding in 2008 and 2007,
  respectively                                                                                1                     1
  Additional paid-in capital                                                            115,191               114,961
  Accumulated deficit                                                                  (112,940)             (115,679)
                                                                              ------------------   --------------------
                                                                                          2,252                  (717)
  Common stock in treasury, at cost  - 24,371 shares                                       (328)                 (328)
                                                                              ------------------   --------------------
       Total shareholders' equity (deficiency)                                            1,924                (1,045)
                                                                              ------------------   --------------------

          TOTAL LIABILITIES AND SHAREHODERS' EQUITY
          (DEFICIENCY)                                                        $           6,812    $            4,522
                                                                              ====================  ==================

</TABLE>
See notes to condensed consolidated financial statements.                      3
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2008 and 2007
                      (in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                                           Three Months Ended
                                                                                           ------------------
                                                                                               March 31,
                                                                                               ---------
                                                                                           2008             2007
                                                                                     ---------------- ----------------
   <S>                                                                              <C>              <C>
   Revenue                                                                          $       1,954    $       2,254
                                                                                     ---------------- ----------------

   Costs and expenses
     Operations, research and development                                                     825              875
     Sales and marketing                                                                      210              337
     General and administrative                                                               786              493
     Amortization and depreciation                                                             76               86
                                                                                     ---------------- ----------------
                                                                                            1,897            1,791
                                                                                     ---------------- ----------------

   Operating income                                                                            57              463

   Other expenses
     Interest expense, net                                                                     12               34
                                                                                     ---------------- ----------------

   Income  before  income taxes                                                                45              429
   Benefit from (provision for) income tax                                                  2,867              (27)
                                                                                     ---------------- ----------------
   Net income                                                                               2,912              402

   Preferred stock dividends                                                                (173)             (212)
                                                                                     ---------------- ----------------

   Net  income  attributable to common shareholders                                 $      2,739     $         190
                                                                                     ================ ================
   Basic  income per share attributable to common shareholders                      $       0.38     $        0.04
                                                                                     ================ ================
   Fully diluted  income per share attributable to common shareholders              $       0.26     $        0.03
                                                                                     ================ ================
   Basic weighted average common shares outstanding                                         7,199            5,253
                                                                                     ================ ================

   Fully diluted weighted average common shares outstanding                                10,927            7,112
                                                                                     ================ ================`
</TABLE>
See notes to condensed consolidated financial statements.                      4

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

               FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                         For the three months ended
                                                                                         --------------------------
                                                                                                  March 31,
                                                                                                  --------
                                                                                            2008              2007
                                                                                     ----------------- ------------------
<S>                                                                                    <C>                <C>
Cash flows from operating activities
 Net income                                                                            $        2,912     $        402

 Adjustments to reconcile net income
  to net cash provided by operations:
   Amortization and depreciation:
     Property and equipment                                                                       76                86
    Stock based compensation expense                                                             180                53

  Changes in operating assets and liabilities:
    Accounts receivable                                                                         (111)              235
    Prepaid expenses and other current assets                                                     (6)               41
    Deferred taxes                                                                            (2,867)               --
    Accounts payable and accrued expenses                                                        (91)               (8)
    Deferred revenue                                                                              94              (184)
                                                                                     ----------------- ------------------
       Net cash provided by operations                                                           187               625
                                                                                     ----------------- ------------------

Cash flows used in investing activities:

 Expenditures for property and equipment                                                         (89)              (49)
                                                                                     ----------------- ------------------

Cash flows used in financing activities:

Payment of dividends on preferred stock                                                         (773)               --
Repayments of revolving loans, net                                                                --              (232)
 Repayment of lines of credit                                                                     --               (86)
 Principal payments on capital lease obligations                                                 (11)              (23)
 Repayments of long-term debt                                                                    (22)              (13)
                                                                                     ----------------- ------------------
       Net cash used in financing activities                                                    (806)             (354)
                                                                                     ----------------- ------------------

Net (decrease) increase in cash and cash equivalents                                            (708)              222

Cash and cash equivalents - beginning of period                                                 2,184              295
                                                                                     ----------------- ------------------

Cash and cash equivalents - end of period                                            $         1,476     $         517
                                                                                     ================= ==================
Supplemental Disclosures:

Cash paid for interest                                                               $            19     $          37
                                                                                     ================= ==================
Cash paid for income taxes                                                           $            30     $          14
                                                                                     ================= ==================
Non-cash investing and financing activities:
  Reduction in accrued liabilities through issuance of debt                          $            62     $           -
                                                                                     ================= ==================
  Acquisition of equipment through issuance of debt                                  $             -     $         104
                                                                                     ================= ==================
  Dividends accrued and unpaid                                                       $           173     $         212
                                                                                     ================= ==================
</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 MONTHS ENDED MARCH 31, 2008 AND 2007


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  March  31,  2008,  and  the  condensed
     consolidated  statements of  operations  and cash flows for the three month
     periods  ended March 31, 2008 and 2007,  have been  prepared by the Company
     and  are not  audited.  These  unaudited,  condensed  consolidated  interim
     financial  statements  have been  prepared in  accordance  with  accounting
     principles  generally  accepted in the United States of America for interim
     financial information and with the instructions to Form 10-Q.  Accordingly,
     they do not  include  all of the  information  and  footnotes  required  by
     accounting  principles  generally  accepted in the United States of America
     ("GAAP") for complete financial statements.  In addition,  the December 31,
     2007 balance sheet data was derived from the audited consolidated financial
     statements,  but does not include all disclosures  required by GAAP.  These
     interim condensed consolidated financial statements include all adjustments
     which  management  considers  necessary  for a  fair  presentation  of  the
     financial  statements and consist of normal recurring items. The results of
     operations  for  the  quarterly  period  ended  March  31,  2008,  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, 2007  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,  2007   consolidated   financial
     statements.

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

     In preparing financial statements in conformity with accounting  principles
     generally  accepted  in the  United  States of  America,  management  makes
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities  and  disclosures of contingent  assets and  liabilities at the
     date of the condensed  consolidated  financial  statements,  as well as the
     reported  amounts of revenue  and  expenses  during the  reporting  period.
     Management  bases its  estimates on  historical  experience  and on various
     assumptions that are believed to be reasonable under the circumstances, the
     results  of which form the basis for making  judgments  about the  carrying
     values of assets and liabilities  that are not readily  apparent from other
     sources.  Disclosures that are particularly sensitive to estimation include
     revenue  recognition,  stock based  compensation,  valuation  allowance  on
     deferred tax assets, and management's plans, as disclosed in Note 9. Actual
     results could differ from those estimates.

2.   The Company

     Direct Insite Corp.  was organized as a public  company,  under the laws of
     the State of  Delaware on August 27,  1987.  Direct  Insite  operates as 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.  The Company's global Electronic
     Invoice Presentment and Payment ("EIP&P") services automate manual business
     processes such as complex  billing,  invoice  validation,  invoice-to-order
     matching, consolidation, dispute handling, and payment processing.

                                                                               6
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

     Management's liquidity plans are discussed in Note 8. Also, as described in
     Note 7, the Company has two  customers  that  accounted  for  approximately
     97.6% of the  Company's  revenue for the three month period ended March 31,
     2008 and 96.1% of revenue for the three month  period ended March 31, 2007.
     Loss of either of these customers  would have a material  adverse effect on
     the Company.

3.   Stock Based Compensation

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

     The Company  accounts for stock  options  using the fair value  recognition
     provisions of Statement of Financial  Accounting Standards ("SFAS") No, 123
     (Revised 2004),  "Share-Based  Payment",  ("SFAS 123(R)"). As a result, for
     the three  months  ended  March 31,  2008 and 2007,  the  Company  recorded
     $45,000 and $33,000,  respectively,  in  compensation  expense for the fair
     value  of  options.   At  March  31,  2008,  there  was  $50,000  of  total
     unrecognized  compensation  costs related to stock options granted which is
     expected to be recognized over a weighted average period of 10 months.

     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 March 31, 2008,  5,754,000  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. During the
     three months ended March 31, 2008 the Company  issued 75,000 options with a
     weighted  average  grant date fair  value of  $69,000.  There  were  65,000
     options  issued  during the three months ended March 31, 2007,  which had a
     weighted  average  grant date fair  value of $11,000  The fair value of the
     stock  options  granted  was  estimated  on the date of the grant using the
     Black-Scholes  option  pricing  model  (see Note 6). The  Company  recorded
     $45,000 and $33,000 as stock compensation expense for options for the three
     months ended March 31, 2008 and 2007, respectively.

     A summary of option  activity  under the plans for the three  months  ended
     March 31, 2008 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, December 31, 2007                  2,592               $0.77
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Granted                                    75               $1.50
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Exercised                                (130)              $0.77
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Canceled                                   --                  --
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Forfeited                                  --                  --
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
   Balance, March 31, 2008                     2,537               $0.79                  1.8                 $2,304
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
   Exercisable, March 31, 2008                 2,440               $0.80                  1.8                 $2,194
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
</TABLE>
     The total fair value of options  vested during the three months ended March
     31, 2008 was $45,000.

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

     During the quarter ended March 31, 2008 the Company  granted  21,858 shares
     to  directors  as part of their  compensation.  The stock grants had a fair

                                                                               7
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007


     value of $33,000 based on the closing price of the stock on the date of the
     grant.  The stock  grants  vest over the two year  period  January  1, 2008
     through December 31, 2009.

     A summary  of the  status of the  Company's  restricted  non-vested  shares
     issued  pursuant to employment and service  agreements as of March 31, 2008
     and changes  during the three  months  ended  March 31,  2008 is  presented
     below:
<TABLE>
<CAPTION>
------------------------------------------ ---------------------------------- ------------------------------------------------

              Non-vested Shares                    Shares (in thousands)      Weighted-average Grant Date Fair Value
------------------------------------------ ---------------------------------- ------------------------------------------------
<S>                                                     <C>                                      <C>
Non-vested at January 1, 2008                           710                                      $2.22
------------------------------------------ ---------------------------------- ------------------------------------------------
Granted                                                  22                                      $1.50

------------------------------------------ ---------------------------------- ------------------------------------------------
Vested                                                  (40)                                     $2.12

------------------------------------------ ---------------------------------- ------------------------------------------------
Forfeited                                                --                                         --
                                           =====================================
------------------------------------------ ---------------------------------- ------------------------------------------------
Non-vested at March 31, 2008                            692                                      $2.20
                                           =====================================
------------------------------------------ ---------------------------------- ------------------------------------------------
</TABLE>
     For the three  months  ended  March 31,  2008 and 2007  stock  compensation
     expense for stock grants was $134,000 and $20,000, respectively. The future
     expected expense for non-vested shares is $1,407,000 and will be recognized
     on a straight-line  basis over the period January 1, 2008 through  December
     31, 2010.

4.   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 (7.25% at March 31, 2008),  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 March 31, 2008 and December 31, 2007,
     the  Company  had no  accounts  receivable  assigned to the Bank and had no
     advances from the Bank.

5.   Debt

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

     At March 31, 2008 and December 31, 2007,  notes payable consist of $259,000
     and $219,000,  respectively,  of borrowings  for the purchase of equipment.
     These notes bear  interest at rates ranging from 9.0% to 10.3% per year and
     mature through January 2012. The notes are  collateralized by the equipment
     purchased with net book values of $215,000 and $187,000,  at March 31, 2008
     and December 31, 2007, respectively.


     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 March 31,  2008,  the
     gross and net book value of the related  assets is  approximately  $135,000

                                                                               8
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007


     and $25,000,  respectively.  At December  31, 2007,  the gross and net book
     value  of the  related  assets  was  approximately  $135,000  and  $28,000,
     respectively.

6.   Shareholders' Equity

     The  following  table  summarizes  the  changes  in  shareholders'   equity
     (deficiency) for the three months ended March 31, 2008:
<TABLE>
<CAPTION>
                     -------------------------------------------------- --------------------
                                                                              In thousands
                     -------------------------------------------------- --------------------
                            <S>                                                 <C>
                            Balance - January 1, 2008                           $ (1,045)
                     -------------------------------------------------- --------------------
                              Dividends accrued                                     (173)
                     -------------------------------------------------- --------------------
                              Stock based compensation                               180
                     -------------------------------------------------- --------------------
                              Shares issued for settlement of
                              accrued liabilities                                     50
                     -------------------------------------------------- --------------------
                              Net income                                           2,912
                                                                               -----------
                     -------------------------------------------------- --------------------
                            Balance - March 31, 2008                            $  1,924
                     -------------------------------------------------- --------------------
</TABLE>
     Common Stock and Option Issuances
     ---------------------------------

     During the three  months  ended March 31, 2008 the  Company  issued  52,500
     restricted  common shares with a fair value of $95,000 based on the closing
     share price on the date of the grant to certain  officers under  employment
     agreements.  The Company also issued 1,552 restricted  common shares valued
     at $3,000 to a former employee for services in 2007, and 61,431  restricted
     common  shares  with a fair  value of $47,500 to an  employee  for  accrued
     compensation  in 2007.  The Company  also issued  77,301  common  shares on
     exercise of stock options. The options were exercised on a cashless basis.

     During the quarter ended March 31, 2008,  the Company issued 75,000 options
     to an officer and a director to purchase common stock.  The options have an
     exercise  prices of $1.50 (the  trading  price of the shares at the date of
     the grant) and a fair value at the grant date of $69,000. The valuation was
     determined using the Black-Scholes  method. The key assumptions used were a
     volatility  of 98.1%,  dividend rate of 0%, a risk free rate of 1.9% and an
     expected life of 3.0 years.  During the quarter  ended March 31, 2007,  the
     Company  issued 65,000 options to employees to purchase  common stock.  The
     options have exercise  prices of $0.61 and $0.70 (the trading prices of the
     shares at the date of the  grant)  and a fair  value at the  grant  date of
     $19,500.  The valuation was determined using the Black-Scholes  method. The
     key assumptions used were a volatility of 69.0% to 74.3%,  dividend rate of
     0%, a risk free rate of 4.9% and an expected life of 3.25 years.

     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  are not included in the  computation  when their effect would be

                                                                               9
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007


     anti-dilutive.  The  following  table  presents  the  shares  used  in  the
     computation of fully diluted  earnings per share for the three months ended
     March 31, 2008 and 2007:
<TABLE>
<CAPTION>
        --------------------------------------------------- ----------------------- ---------------------------------
                                                              Three Months Ended           Three Months Ended
                                                                March 31, 2008               March 31, 2007

        --------------------------------------------------- ----------------------- ---------------------------------
                                                                (in thousands)               (in thousands)
         --------------------------------------------------- ----------------------- ---------------------------------
               <S>                                                   <C>                          <C>
               Common shares outstanding                             7,199                        5,253
         --------------------------------------------------- ----------------------- ---------------------------------
               Warrants to purchase common stock                       989                        1,047
         --------------------------------------------------- ----------------------- ---------------------------------
               Options to purchase common stock                      1,387                          812
         --------------------------------------------------- ----------------------- ---------------------------------
               Stock grants                                              5                           --
         --------------------------------------------------- ----------------------- ---------------------------------
               Series A Convertible preferred stock                  1,347                           --
                                                                    ------                        ------
         --------------------------------------------------- ----------------------- ---------------------------------
               Total fully diluted shares                           10,927                        7,112
                                                                    ======                        ======
        --------------------------------------------------- ----------------------- ---------------------------------
</TABLE>
     Securities that could potentially dilute basic EPS in the future, that were
     not included in the  computation  of the diluted EPS because to do so would
     have been antidilutive for the periods presented,  consist of the following
     (in thousands):
<TABLE>
<CAPTION>
                                                                                Three Months Ended March 31,
                                                                                  2008                 2007
                                                                                  ----                 ----
           <S>                                                                     <C>               <C>
           Options to purchase common stock                                         75                2,058
           Warrants to purchase common stock                                       552                  643
           Restricted stock grants                                                 673                   --
           Series A Convertible preferred stock                                     --                1,347
                                                                                  -----               -----

                 Total potential common shares as of March 31                     1,300               4,048
                                                                                  =====               =====
</TABLE>
7.   Products and Services

     The Company and its subsidiaries  currently operate in one business segment
     and provide two separate  products:  ASP  services  and custom  engineering
     services.
<TABLE>
<CAPTION>


                                                                Three Months Ended March 31,
                                                                   2008                 2007
                                                           ------------------- --------------------
                     <S>                                           <C>              <C>
                     ASP IOL fees                                  $1,829           $   1,663
                     Custom engineering fees                          125                 591
                                                                  -------            --------

                          Total Revenue                            $1,954              $2,254
                                                                   ======              ======
</TABLE>
     Major Customers
     ---------------

     For the three months ended March 31, 2008, IBM and Electronic  Data Systems
     ("EDS")  accounted  for  47.6% and 50.0% of the  Company's  total  revenue,
     respectively.  For the  three  months  ended  March 31,  2007,  IBM and EDS
     accounted  for  50.2% and 45.9% of total  revenue,  respectively.  Accounts
     receivable  from these  customers  amounted to $1,537,000 and $1,416,000 at
     March 31, 2008 and December 31, 2007, respectively.

                                                                              10
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007


8.   Income Taxes

     In its interim  financial  statements  the Company  follows the guidance in
     Accounting   Principles   Board  ("APB")  Opinion  28  "Interim   Financial
     Reporting"  and FIN 18 "Accounting  for Income Taxes in Interim  Periods an
     Interpretation of APB 28", whereby the Company utilizes the expected annual
     effective tax rate in determining its income tax provisions for the interim
     period's  income or loss. As the Company has significant net operating loss
     carry-forwards  the  effective  income tax rate applied to the period ended
     March 31, 2008 income was 0%. The Company  accounts  for income taxes using
     the liability  method.  The liability method requires the  determination of
     deferred tax assets and liabilities  based on the  differences  between the
     financial  statement and income tax basis of assets and liabilities,  using
     enacted tax rates. Additionally,  net deferred tax assets are adjusted by a
     valuation  allowance if, based on the weight of available  evidence,  it is
     more  likely  than not that some  portion  or all of the net  deferred  tax
     assets will not be realized. The Company currently has significant deferred
     tax assets consisting  predominately of net operating loss  carry-forwards.
     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.  During the three
     months ended March 31, 2008,  the Company  reviewed  previous  positive and
     negative  evidence and also reviewed its expected taxable income for future
     periods and  concluded  that it is more likely than not that  approximately
     $2,867,000  of tax benefits  related to net operating  loss  carry-forwards
     will be utilized in future tax years and, therefore,  reduced its valuation
     allowance  during the quarter ended March 31, 2008 in  accordance  with APB
     28. As a result the Company's effective tax rate for the three months ended
     March 31, 2008 differs from the current  statutory rates. In addition,  the
     Company  expects to provide a valuation  allowance on the remaining  future
     tax  benefits  until  it  can  sustain  a  level  of   profitability   that
     demonstrates  its  ability  to  utilize  the  remaining  assets,  or  other
     significant  positive  evidence arises that suggests its ability to utilize
     the remaining assets.  The future  realization of a portion of its reserved
     deferred tax assets related to tax benefits associated with the exercise of
     stock options,  if and when  realized,  will not result in a tax benefit in
     the  consolidated  statement  of  operations,  but rather will result in an
     increase in  additional  paid in  capital.  The  Company  will  continue to
     re-assess its reserves on deferred income tax assets in future periods on a
     quarterly  basis.  The Company has elected the "with and without  approach"
     regarding  ordering  of windfall  tax  benefits  to  determine  whether the
     windfall tax benefit did reduce taxes  payable in the current  year.  Under
     this  approach the windfall tax benefit  would be  recognized in additional
     paid-in-capital  only if an  incremental  tax  benefit  is  realized  after
     considering all other benefits presently available.

9.   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 three months ended March 31, 2008 and the year ended  December
          31, 2007 the Company had net cash  provided by  operations of $187,000
          and $3,255,000, respectively. The Company will continue to monitor and
          control  expenses  and  anticipates  that it will  continue to achieve
          positive cash flows from operations.

     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
          year ended  December 31, 2007 the Company signed  agreements  with two
          new customers to provide IOL  services.  Management  anticipates  that

                                                                              11
<PAGE>

                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007


          revenue  from new  customers  will  continue  to  increase in 2008 and
          beyond and  expects  to further  broaden  the  customer  base in 2008,
          although  there  is no  assurance  that  the  Company  will be able to
          further broaden its customer base.

     o    Based on the advice of legal counsel,  management believes the Company
          may only pay  dividends  to the  extent  it has a surplus  or  current
          earnings pursuant to Delaware General Corporate Law.

     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 March 31, 2009. 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.

10.  New Accounting Pronouncements

     In  September  2006,  the FASB issued  Statement  of  Financial  Accounting
     Standards  ("SFAS") 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.  On February 12, 2008,  the FASB issued FASB Staff  Position
     (FSP) No. SFAS 157-2,  "Effective Date of FASB Statement No. 157" (FSP SFAS
     157-2).  FSP SFAS 157-2 amends SFAS No. 157, to delay the effective date of
     SFAS 157 for nonfinancial assets and nonfinancial  liabilities,  except for
     the items that are  recognized  or disclosed at fair value in the financial
     statements on a recurring basis. For items within its scope, FSP SFAS 157-2
     defers  the  effective  date of SFAS 157 to fiscal  years  beginning  after
     November  15,  2008.  The  Company is  currently  evaluating  the impact of
     adopting  SFAS  157  and  FSP  SFAS  157-2  on our  consolidated  financial
     statements.

     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. The Company has not elected to use the fair value method
     for any financial assets or liabilities and therefore SFAS 159 did not have
     an effect on the Company's financial position or results of operations.

     In  December  2007,  the FASB  issued  Statement  of  Financial  Accounting
     Standards ("SFAS") No. 141R,  "Business  Combinations" ("SFAS 141R"), which
     replaces  SFAS No.  141,  "Business  Combinations."  SFAS 141R  establishes
     principles and  requirements  for determining how an enterprise  recognizes
     and measures the fair value of certain assets and liabilities acquired in a
     business  combination,   including  non-controlling  interests,  contingent
     consideration, and certain acquired contingencies.  SFAS 141R also requires

                                                                              12
<PAGE>

                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007


     acquisition-related   transaction   expenses  and  restructuring  costs  be
     expensed as incurred rather than capitalized as a component of the business
     combination.  SFAS  141R  will  be  applicable  prospectively  to  business
     combinations for which the acquisition date is on or after the beginning of
     the first annual  reporting period beginning on or after December 15, 2008.
     SFAS 141R would have an impact on accounting  for any  businesses  acquired
     after the effective date of this pronouncement.

     In December 2007, the FASB issued SFAS No. 160, "Non-controlling  Interests
     in Consolidated  Financial  Statements - An Amendment of ARB No. 51" ("SFAS
     160").  SFAS 160  establishes  accounting  and reporting  standards for the
     non-controlling  interest  in  a  subsidiary  (previously  referred  to  as
     minority interests). SFAS 160 also requires that a retained non-controlling
     interest upon the  deconsolidation of a subsidiary be initially measured at
     its fair value. Upon adoption of SFAS 160, the Company would be required to
     report  any   non-controlling   interests   as  a  separate   component  of
     stockholders' equity. The Company would also be required to present any net
     income allocable to non-controlling  interests and net income  attributable
     to  the  stockholders  of  the  Company   separately  in  its  consolidated
     statements  of  operations.  SFAS 160 is effective  for fiscal  years,  and
     interim  periods within those fiscal years,  beginning on or after December
     15, 2008. SFAS 160 requires  retroactive  adoption of the  presentation and
     disclosure   requirements  for  existing  minority  interests.   All  other
     requirements  of SFAS 160 shall be  applied  prospectively.  SFAS 160 would
     have an impact on the  presentation  and disclosure of the  non-controlling
     interests of any non wholly-owned businesses acquired in the future.

     In December  2007,  the Staff of the  Securities  and  Exchange  Commission
     issued Staff  Accounting  Bulletin No. 110 Share-Based  Payment ("SAB 110")
     which  amends  SAB 107  regarding  the  use of a  "simplified"  method,  as
     discussed in SAB 107, in  developing  an estimate of the  expected  term of
     "plain  vanilla"  share options in  accordance  with FASB No. 123(R) "Share
     Based  Payment".  Use of the  simplified  method  after  December  2007  is
     permitted only for companies whose  historical data about their  employees'
     exercise  behavior does not provide a reasonable  basis for  estimating the
     expected term of the options. The Company adopted SAB 110 effective January
     1, 2008 and will continue to apply the simplified  method until  sufficient
     historical experience is readily available to provide a reasonable estimate
     of the expected term for employee  options  grants.  The impact of adopting
     SAB 110 was not material.

     In March  2008,  the FASB issued SFAS 161,  "Disclosures  about  Derivative
     Instruments and Hedging Activities an amendment of FASB Statement No. 133",
     which amends and expands the disclosure requirements of SFAS 133 to require
     qualitative   disclosure   about   objectives   and  strategies  for  using
     derivatives, quantitative disclosures about fair value amounts of and gains
     and   losses   on   derivative    instruments,    and   disclosures   about
     credit-risk-related  contingent  features in  derivative  agreements.  This
     statement  will be effective for the Company  beginning on January 1, 2009.
     The  adoption  of this  statement  will change the  disclosures  related to
     derivative instruments held by the Company, if any.

                                                                              13
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES


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

Forward looking statements

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

Overview

Direct Insite Corp. and its  subsidiaries  (hereinafter  referred to at times as
"Direct Insite" or the "Company"),  was organized as a public company, under the
laws of the State of Delaware on August 27, 1987.  Direct Insite  operates as 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.   The  Company's  global  Electronic   Invoice
Presentment and Payment ("EIP&P")  services  automate manual business  processes
such  as  complex  billing,  invoice  validation,   invoice-to-order   matching,
consolidation, dispute handling, and payment processing.

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

Currently,  IBM,  representing  approximately 47.6% and 50.2% of our revenue for
the three month  periods ended March 31, 2008 and 2007,  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, 365 days a year.  Electronic  Data Systems Corp.
("EDS")  accounted  for  approximately  50.0% and 45.9% of revenue for the three
months ended March 31, 2008 and 2007, 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

                                                                              14
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES


on historical  experience and on various other  assumptions that are believed to
be reasonable under the  circumstances,  the results of which form the basis for
making  judgments about the carrying  values of assets and liabilities  that are
not readily  apparent  from other  sources.  On a continuing  basis,  management
reviews its estimates  utilizing  currently  available  information,  changes in
facts and circumstances, historical experience and reasonable assumptions. After
such  reviews,   and  if  deemed  appropriate,   those  estimates  are  adjusted
accordingly.  Actual results may vary from these estimates and assumptions under
different  and/or  future  circumstances.  Management  considers  an  accounting
estimate to be critical if:

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

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

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

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

We record revenue in accordance with 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
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.

                                                                              15
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES


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

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

The  allowance  for doubtful  accounts  reflects  management's  best estimate of
probable  losses  inherent  in  the  account  receivable   balance.   Management
determines  the  allowance   based  on  known  troubled   accounts,   historical
experience,  and other  currently  available  evidence.  At March  31,  2008 and
December 31, 2007, 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 months ended March 31,
2008 and 2007, respectively.

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.  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

                                                                              16
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES


additional  paid in capital.  We will  continue  to  re-assess  our  reserves on
deferred income tax assets in future periods on a quarterly basis (see note 8 to
the Condensed Consolidated Financial Statements).

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

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


Results of operations

For the three  months  ended  March 31, 2008 we had income  from  operations  of
$57,000  compared  to income from  operations  of $463,000 in the same period in
2007. We had net income of $2,912,000  for the three months ended March 31, 2008
compared to net income of $402,000 for the three months ended March 31, 2007.

For the three months ended March 31, 2008 revenue decreased  $300,000 (13.3%) to
$1,954,000  compared to revenue of $2,254,000 for the same period in 2007.  This
decrease is primarily the result of a decrease in engineering  services  revenue
of  $466,000  (78.8%)  offset by an  increase  of  $166,000  (10.0%) in our core
business, the ASP IOL services. The decrease in the engineering services revenue
is due to a decrease in the number and size of  projects  in process  during the
first  quarter of 2008.  We  anticipate  that  revenue  from new  projects  will
increase  during the remainder of 2008 as we begin new  initiatives  at both IBM
and EDS and as we expand our customer base.

Costs of  operations,  research and  development  decreased by $50,000 (5.7%) to
$825,000 for the three months ended March 31, 2008 compared to costs of $875,000
for the three months ended March 31, 2007.  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 decrease in costs is  principally  due to  decreases in personnel  wages and
benefit costs of $69,000 from staff reductions,  a decrease in costs of contract
labor of  $42,000,  offset by an  increase  in costs for a second data center of
$37,000 and increases in other costs of $24,000.

Sales and  marketing  costs were  $210,000  for the three months ended March 31,
2008, a decrease of $127,000 or 37.7% compared to costs of $337,000 for the same
period in 2007.  Personnel  and related  benefit  costs  decreased  $39,000 as a
result of staff reductions, travel and entertainment costs decreased $40,000 and
professional  fees  decreased  $30,000  while  other sales and  marketing  costs
decreased by $18,000.

General and administrative  costs increased $293,000 (59.4%) to $786,000 for the
three  months  ended March 31, 2008  compared to costs of $493,000  for the same
period in 2007. The increase is  principally  due to an increase in salaries and
related  benefit costs of $58,000,  and stock  compensations  costs of $144,000.
Travel and  entertainment  costs  increased  $50,000 while all other general and
administrative costs increased $41,000.

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                      DIRECT INSITE CORP. AND SUBSIDIARIES


Interest expense,  net decreased $22,000 (64.7%) to $12,000 for the three months
ended March 31,  2008  compared to costs of $34,000 for the same period in 2007.
This is principally due the lower rate of borrowing in 2008 compared to 2007.

During the three months ended March 31, 2008,  we recorded a benefit from income
tax of  $2,867,000  as a result  of  reducing  the  valuation  allowance  on our
deferred tax assets for net operating  loss  carry-forwards  we more likely than
not expect to utilize in future years.

Financial Condition and Liquidity

Cash provided by operating  activities for the three months ended March 31, 2008
was $187,000  compared to cash  provided by operations of $625,000 for the three
months  ended  March 31,  2007.  This  consisted  of the net income of  $45,000,
increased  by  non-cash  expenses  of  $256,000,   including   depreciation  and
amortization of property and equipment of $76,000, and stock-based  compensation
expense of $180,000.  This was offset by an increase in accounts  receivable  of
$111,000 and prepaid  expenses of $6,000 and a decrease in accounts  payable and
accrued expenses of $91,000. Deferred revenue decreased by $94,000.

Cash used in investing  activities  was $89,000 for the three months ended March
31,  2008,  compared to $49,000 for same  period in 2007.  This was  principally
expenditures for equipment.

Cash used in financing  activities  totaled  $806,000 for the three months ended
March 31, 2008,  compared to cash used in financing  activities  of $354,000 for
the three  months  ended  March 31,  2007.  We paid  $773,000  in  dividends  on
preferred  stock  and  repaid  $33,000  of  long-term  debt  and  capital  lease
obligations in the first quarter of 2008.

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 three months ended March 31, 2008 and the year ended  December
          31,  2007 we had net cash  provided  by  operations  of  $187,000  and
          $3,255,000,  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 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
          year  ended  December  31,  2007 we  signed  agreements  with  two new
          customers to provide IOL services. We anticipate that revenue from new
          customers  will  continue to increase in 2008 and beyond and we expect
          to further  broaden our customer  base in 2008,  although  there is no
          assurance that we will be able to further broaden our customer base.

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                      DIRECT INSITE CORP. AND SUBSIDIARIES


     o    Based on the advice of legal counsel,  we believe the Company may only
          pay  dividends  to the  extent it has a surplus  or  current  earnings
          pursuant to Delaware General Corporate Law.

     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  March 31, 2009.  There can be no assurance,
     however, we will achieve the cash flow and profitability  goals, or that we
     will be able to  raise  additional  capital  sufficient  to meet  operating
     expenses or implement its 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.   Quantitative and Qualitative Disclosures About Market Risk

     Interest Rate Risk.

     We are exposed to the impact of changes in interest  rates  principally  on
     our Accounts  Receivable Line of Credit which has a variable  interest rate
     factor  based on the prime rate.  An increase or decrease in the prime rate
     could  increase or decrease  our  interest  costs.  During the three months
     ended  March 31,  2008 we had no  borrowings  under this line of credit and
     therefore  the change in the prime rate  during the period had no effect on
     our consolidated financial position, results of operations or cash flows.

Item 4T.  Controls and Procedures

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

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

     Based  on our  evaluation  which  took  place  as of March  31,  2008  (the
     "Evaluation  Date"), we believe that these procedures were not effective as
     a result  of  limited  resources  and a  limited  segregation  of duties in
     accounting and financial  reporting.  More specifically,  the Company has a
     limited  number  of  personnel  in the  finance  and  accounting  area  and
     therefore one person performs various accounting  functions where a greater
     segregation  of duties  would  permit  checks and balances and reviews that
     would improve internal control. The Company has been aware of this material
     weakness  since  January  2004 at which  time the  staff of the  accounting
     department was reduced.  As a result the Chief  Financial  Officer  devotes
     substantive time to reviewing the accounting  records and financial reports
     and the Company expects that this will continue until  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

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                      DIRECT INSITE CORP. AND SUBSIDIARIES


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

     There  was no change  in the  Company's  internal  control  over  financial
     reporting  during the  Company's  last fiscal  quarter that has  materially
     affected,  or is  reasonably  likely to  materially  affect,  the Company's
     internal control over financial reporting, 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 as of the
     Evaluation Date, under standards  established by the American  Institute of
     Certified  Public   Accountants.   As  previously  stated,  the  reportable
     condition and material  weakness  relates to limited  segregation of duties
     and the absence of reviews and approvals beyond that performed by the Chief
     Financial  Officer and the consultant as mentioned  above,  of transactions
     and  accounting  entries.  Given this  reportable  condition  and  material
     weakness,  the Chief Financial Officer devoted  additional time to closing,
     preparing and reviewing the report for the quarter ended March 31, 2008.

                                                                              20
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                      DIRECT INSITE CORP. AND SUBSIDIARIES

                           PART II - OTHER INFORMATION





Item 1. Legal Proceedings

     None

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

     None

Item 3. Defaults Upon Senior Securities

     None

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

     None

Item 5. Other Information

     None

Item 6. Exhibits


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

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

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                      DIRECT INSITE CORP. AND SUBSIDIARIES

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.




DIRECT INSITE CORP.




/s/  James A. Cannavino
------------------------------------------------------
James A. Cannavino, Chief Executive Officer                May 15, 2008



/s/ Michael J. Beecher
------------------------------------------------------
Michael J. Beecher,  Chief Financial Officer               May 15, 2008