UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                   FORM 10-QSB
                                   (Mark One)


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


                  For the quarterly period ended March 31, 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 May 10,
     2007 was: 5,253,384.

     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 March 31, 2007 (Unaudited) and
       December 31, 2006 .................................................................................        3

     Condensed Consolidated Statements of Operations
       For the Three Months Ended March 31, 2007 and 2006 (Unaudited).....................................        4

     Condensed Consolidated Statements of Cash Flows
       For the Three Months Ended March 31, 2007 and 2006 (Unaudited).....................................        5

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

     Item 2

     Management's Discussion and Analysis or Plan of Operations ..........................................       16

     Item 3

     Controls and Procedures..............................................................................       22

PART II - OTHER INFORMATION

     Item 1. Legal Proceedings ...........................................................................       24

     Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..................................       24

     Item 3. Defaults Upon Senior Securities .............................................................       24

     Item 4.  Submission of Matters to a Vote of Security Holders ........................................       24

     Item 5. Other Information ...........................................................................       24

     Item 6. Exhibits.....................................................................................       24

     Signatures ..........................................................................................       25


CERTIFICATIONS ...........................................................................................       26
</TABLE>
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                   AS OF MARCH 31, 2007 AND DECEMBER 31, 2006
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                    March 31,          December 31,
                                                                                    ---------          ------------
                                                                                      2007                 2006
                                                                              --------------------- --------------------
                                                                                   (Unaudited)           (Audited)
<S>                                                                           <C>                   <C>
ASSETS
Current assets
  Cash and cash equivalents                                                   $             517     $             295
  Accounts receivable, net of allowance for doubtful accounts of
   $0 in 2007 and 2006                                                                    1,764                 1,999
  Prepaid expenses and other current assets                                                  98                   139
                                                                              --------------------- --------------------
       Total current assets                                                               2,379                 2,433

Property and equipment, net                                                                 518                   450
Other assets                                                                                279                   280
                                                                              --------------------- --------------------
         TOTAL ASSETS                                                          $          3,176     $           3,163
                                                                              ===================== ====================

LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities
  Short-term revolving loans                                                   $            249     $             481
  Lines of credit                                                                           500                   586
  Current portion of capital lease obligations                                               45                    58
  Current portion of notes payable                                                           78                    53
  Accounts payable and accrued expenses                                                   2,026                 2,028
  Dividends payable                                                                       2,701                 2,489
  Deferred revenue                                                                          380                   564
  Warrant liability                                                                           0                   602
  Liabilities from discontinued operations                                                   31                    37
                                                                              --------------------- --------------------
       Total current liabilities                                                          6,010                 6,898

Capital lease obligations, net of current portion                                            24                    34
Notes payable, net of current portion                                                       197                   130
                                                                              --------------------- --------------------
       Total liabilities                                                                  6,231                 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;
  5,293,311 shares issued in 2007 and 2006; and 5,253,384 shares
  outstanding in 2007 and 2006                                                                 -                     -
  Additional paid-in capital                                                             113,803               113,185
  Accumulated deficit                                                                   (116,530)             (116,756)
                                                                              --------------------- --------------------
                                                                                          (2,727)               (3,571)
  Common stock in treasury, at cost  - 24,371 shares                                        (328)                 (328)
                                                                              --------------------- --------------------
       Total shareholders' deficiency                                                     (3,055)               (3,899)
                                                                              --------------------- --------------------

          TOTAL LIABILITIES AND SHAREHODERS' DEFICIENCY                        $           3,176    $            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 MONTHS ENDED MARCH 31, 2007 and 2006
                      (in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                                           Three Months Ended
                                                                                           ------------------
                                                                                               March 31,
                                                                                               ---------
                                                                                          2007             2006
                                                                                    ---------------- ----------------
   <S>                                                                              <C>               <C>
   Revenue                                                                          $       2,254     $      2,015
                                                                                    ---------------- ----------------

   Costs and expenses
     Operations, research and development                                                     875            1,063
     Sales and marketing                                                                      337              463
     General and administrative                                                               493              694
     Amortization and depreciation                                                             86               87
                                                                                    ---------------- ----------------
                                                                                            1,791            2,307
                                                                                    ---------------- ----------------

   Operating income (loss)                                                                    463             (292)

   Other expenses
     Other expense, net                                                                        --               60
     Interest expense, net                                                                     34              181
                                                                                    ---------------- ----------------
   Income (loss) before provision for income tax                                              429             (533)

   Provision for income tax                                                                   (27)              --
                                                                                    ---------------- ----------------
   Net income (loss)                                                                          402             (533)

   Preferred stock dividends                                                                 (212)            (172)
                                                                                    ---------------- ----------------

   Net income (loss) attributable to common shareholders                            $         190    $        (705)
                                                                                    ================ ================

   Basic  income (loss) per share attributable to common shareholders               $        0.04    $       (0.14)
                                                                                    ================ ================
   Fully diluted income (loss) per share attributable to common shareholders        $        0.03    $       (0.14)
                                                                                    ================ ================
   Basic weighted average common shares outstanding                                         5,253            4,933
                                                                                    ================ ================
   Fully diluted weighted average common shares outstanding                                 7,112            4,933
                                                                                    ================ ================

</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, 2007 AND 2006
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                          For the three months ended
                                                                                          --------------------------
                                                                                                  March 31,
                                                                                                  ---------
                                                                                           2007              2006
                                                                                     ----------------- ------------------
<S>                                                                                     <C>              <C>
Cash flows from operating activities
 Net income (loss) from continuing operations                                           $        402     $        (533)
 Adjustments to reconcile net income (loss) from continuing operations
  to net cash provided by continuing operations:
   Amortization and depreciation:
     Property and equipment                                                                       86                87
     Discount on debt                                                                             --               125
    Amortization of deferred stock based compensation expense                                     53                50
    Change in fair value of warrant liability                                                     --                30

  Changes in operating assets and liabilities:
    Accounts receivable                                                                          235               496
    Prepaid expenses and other current assets                                                     41                61
    Other assets                                                                                  --                 4
    Accounts payable and accrued expenses                                                         (2)              158
    Deferred revenue                                                                            (184)             (250)
                                                                                     ----------------- ------------------
       Net cash provided by continuing operations                                                631               228
                                                                                     ----------------- ------------------

  Change in:
    Lliabilities from discontinued operations                                                     (6)               (8)
                                                                                     ----------------- ------------------
       Net cash used in discontinued operations                                                   (6)               (8)
                                                                                     ----------------- ------------------

       Net cash provided by operating activities                                                 625               220
                                                                                     ----------------- ------------------

Cash flows used in investing activities
 Expenditures for property and equipment                                                         (49)              (24)
                                                                                     ----------------- ------------------

Cash flows used in financing activities
 Repayments of revolving loans, net                                                             (232)             (448)
 Repayment of lines of credit                                                                    (86)              (10)
 Principal payments on capital lease obligations                                                 (23)              (29)
 Repayments of long-term debt                                                                    (13)               --
                                                                                     ----------------- ------------------
       Net cash used in financing activities                                                    (354)             (487)
                                                                                     ----------------- ------------------

Net increase (decrease) in cash and cash equivalents                                             222              (291)

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

Cash and cash equivalents - end of period                                              $         517     $          73
                                                                                     ================= ==================


Cash paid for interest                                                                 $          37     $          47
                                                                                     ================= ==================
Cash paid for income taxes                                                             $          14     $          --
                                                                                     ================= ==================
Non-cash investing and financing activities:
Acquisition of equipment through issuance of debt                                      $         104     $          --
                                                                                     ================= ==================
Dividends accrued and unpaid                                                           $         212     $         172
                                                                                     ================= ==================
</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, 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  March  31,  2007,  and  the  condensed
     consolidated  statements of  operations  and cash flows for the three month
     periods  ended March 31, 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 accepting 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  quarterly  period  ended March 31,  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 EITF  00-19-2 and 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 10. Actual  results could differ
     from those estimates.

2.   The Company

     Direct Insite Corp. and subsidiaries (the "Company"),  primarily operate as
     an  application  service  provider  ("ASP"),  that  markets  an  integrated
     transaction based "fee for service" offering called Invoices On-Line (IOL),
     an  electronic  invoice   presentment  and  payment  (EIP&P)  service  that

                                                                               6
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006


     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
     50.2% and 45.9% of the  Company's  revenue for the three month period ended
     March 31, 2007 and 71.5% and 26.5% of revenue  for the three  month  period
     ended  March  31,  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 the Financial  Accounting  Standards  Board Staff  Position EITF 00-19-2
     ("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 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.  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 31, 2006, and is to be applied to all
     open  tax  years  as of the  date of  effectiveness.  FIN 48 also  provides
     guidance  on   derecognition,   classification,   interest  and  penalties,
     accounting in interim  periods,  disclosure and  transition.  There were no
     unrecognized tax benefits as of January 1, 2007.

     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

                                                                               7
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006


     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 three
     months ended March 31, 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 months
     ended March 31, 2007 and 2006,  the Company  recorded  $33,000 and $28,000,
     respectively,  in  compensation  expense for the fair value of options.  At
     March 31, 2007, there was $103,000 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 March 31, 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
     65,000  options  issued  during the three months ended March 31, 2007.  The
     weighted  average  grant date fair value of these  options was $11,000.  No
     options were issued during the three months ended March 31, 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).

     A summary of option  activity  under the plans for the three  months  ended
     March 31, 2007 is as follows:
<TABLE>
<CAPTION>
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
                                                                                   Weighted Average
                                               Shares         Weighted Average Remaining Contractual Aggregate Intrinsic Value
                                           (in thousands)      Exercise Price       Term (in years)       (in thousands)
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
   <S>                                         <C>                 <C>                    <C>                  <C>
   Balance, December 31, 2006                  4,604               $1.15
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Granted                                    65               $0.64
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Exercised                                 --
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Canceled                                 (837)              $1.28
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
       Forfeited                                 --
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
   Balance, March 31, 2007                     3,832               $1.12                  2.2                  $ 374
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
   Exercisable, March 31, 2007                 3,478               $1.19                  2.0                  $ 233
   ------------------------------------ ----------------- --------------------- -------------------- ----------------------
</TABLE>

                                                                               8
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006


     A summary of the status of the Company's  non-vested shares as of March 31,
     2007 and changes  during the three months ended March 31, 2007 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, 2007                           385                                     $0.24
------------------------------------------- ----------------------------------- ----------------------------------------------
Granted                                                  65                                     $0.33
------------------------------------------- ----------------------------------- ----------------------------------------------
Vested                                                  (85)                                    $0.24
------------------------------------------- ----------------------------------- ----------------------------------------------
Forfeited                                               (11)                                    $1.08
                                            -----------------------------------

------------------------------------------- ----------------------------------- ----------------------------------------------
Non-vested at March 31, 2007                            354                                     $0.23
                                            =====================================
------------------------------------------- ----------------------------------- ----------------------------------------------
</TABLE>

     The total fair value of shares  vested  during the three months ended March
     31, 2007 was $20,000.

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 March 31, 2007 and
     December 31, 2006,  liabilities of the  discontinued  operation  consist of
     loans and accounts payable of $31,000 and $37,000, respectively.

7.   Accounts Receivable and Revolving Loans

     The Company  has an Accounts  Receivable  Purchase  Agreement  with a Bank,
     whereby  the Company  from time to time may assign  some of their  accounts
     receivable to the Bank on a full  recourse  basis.  Upon  specific  invoice
     approval, an advance of 80% of the underlying receivable is provided to the
     Company.  The  remaining  balance  (20%),  less  an  administrative  fee of
     approximately  0.5% plus interest at the rate of 1 1/2% per month,  is paid
     to the  Company  once the  customer  has paid.  The  maximum  amount of all
     assigned receivables outstanding at any time shall not exceed $1.5 million.
     The initial term of the agreement was for one year, and continues until due
     notice  of  termination  is  given  at any  time  by  either  party  to the
     agreement.  At March 31,  2007,  the  Company  had no  accounts  receivable
     assigned  to the Bank.  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 March 31, 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.

                                                                               9
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006



8.   Debt

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

     At March 31, 2007 and December 31, 2006,  notes payable consist of $275,000
     and $184,000,  respectively,  of borrowings  for the purchase of equipment.
     These notes bear  interest at rates  ranging from 8.8% to 9.3% per year and
     mature  through April 2011. The notes are  collateralized  by the equipment
     purchased with net book values of $264,000 and $178,000,  at March 31, 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.

     The credit  facility  permits 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.  The
     interest rate is the JPMC reserve  adjusted  LIBOR plus 2.30%.  As of March
     31, 2007 and December 31, 2006,  the balance  outstanding  was $500,000 and
     the applied interest rate was 7.675% and 7.93%, respectively.

     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 6.9% to 19.2%. At March 31, 2007, the gross
     and net book value of the  related  assets is  approximately  $218,000  and
     $46,000,  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

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

                                                                              10
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006



     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.  During the quarter ended March 31, 2006,  the
     Company did not issue any shares of common stock or 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  antidilutive.  The  following  table  presents  the shares  used in the
     computation of fully diluted  earnings per share for the period ended March
     31, 2007:
<TABLE>
<CAPTION>
        -------------------------------------------------------- -----------------------------------------
                                                                              (in thousands)
        -------------------------------------------------------- -----------------------------------------
               <S>                                                                     <C>
               Common shares outstanding                                               5,253
        -------------------------------------------------------- -----------------------------------------
               Warrants to purchase common stock                                       1,047
        -------------------------------------------------------- -----------------------------------------

               Options to purchase common stock                                          812
                                                                 ----------------------------
        -------------------------------------------------------- -----------------------------------------
               Total fully diluted shares                                              7,112
                                                                 ===========================
        -------------------------------------------------------- -----------------------------------------
</TABLE>
     There were no dilutive  securities  for the quarter ended March 31, 2006 as
     the period had a net loss and the effect of any dilutive  securities  would
     have been anti-dilutive. 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,
                                                                         ----------------------------
                                                                           2007                 2006
                                                                           ----                 ----
           <S>                                                             <C>                  <C>
           Options to purchase common stock                                2,058                4,854
           Warrants to purchase common stock                                 643                3,332
           Series A Convertible preferred stock                            1,347                1,347
                                                                           -----                -----
                 Total potential common shares as of March 31              4,048                9,533
                                                                           =====                =====
</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.
<TABLE>
<CAPTION>
                                                                Three Months Ended March 31,
                                                                ----------------------------
                                                                   2007                 2006
                                                           ------------------- --------------------
                     <S>                                           <C>              <C>
                     ASP IOL fees                                  $1,663           $   1,558
                     Custom engineering fees                          591                 457
                                                                  -------            --------
                          Total Revenue                            $2,254              $2,015
                                                                   ======              ======
</TABLE>
                                                                              11
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006




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

     For the three months ended March 31, 2007, IBM and Electronic  Data Systems
     ("EDS")  accounted  for  50.2% and 45.9% of the  Company's  total  revenue,
     respectively.  For the  three  months  ended  March 31,  2006,  IBM and EDS
     accounted  for  71.5% and 26.5% of total  revenue,  respectively.  Accounts
     receivable  from these  customers  amounted to $1,674,000 and $1,937,000 at
     March 31, 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 three months ended March 31, 2007 and the year ended  December
          31, 2006 the Company had net cash provided by continuing operations of
          $631,000 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.

     o    The  Company  and the  holders of the Series A and Series B  Preferred
          stock  have  previously  agreed to defer  payment of  dividends  until
          February 1, 2006 and April 15, 2006, respectively. Management believes
          that, based on advice of counsel, the Company is precluded from paying
          these  dividends at this time pursuant to Delaware  General  Corporate
          Law.

     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.

     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 2004
          the Company  entered  into a new  agreement to provide IOL services to
          EDS.  Revenue from EDS  accounted  for 45.9% of total  revenue for the
          three months ended March 31, 2007. Management anticipates that revenue
          from this  customer  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 three months ended
          March 31, 2007, operating costs decreased $516,000,  or 22.4% compared
          to operating  costs for the three  months  ended March 31,  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.

                                                                              12
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006




     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, 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.  New Accounting Pronouncements

     In February  2006,  the FASB issued  SFAS No. 155  "Accounting  for Certain
     Hybrid Financial  Instruments,  an amendment of FASB Statements No. 133 and
     140" ("SFAS 155").  SFAS 155 clarifies  certain issues relating to embedded
     derivatives and beneficial  interests in securitized  financial assets. The
     provisions of SFAS 155 are effective for all financial instruments acquired
     or issued  after fiscal  years  beginning  after  September  15, 2006.  The
     adoption  of SFAS 155 did not have a  material  effect on the  consolidated
     financial position, results of operations or cash flows of the Company.

     In March 2006, the FASB issued SFAS No. 156,  "Accounting  for Servicing of
     Financial  Assets"  ("SFAS 156"),  which amends SFAS 140,  "Accounting  for
     Transfers  and  Servicing  of  Financial  Assets  and   Extinguishments  of
     Liabilities",  with respect to the  accounting  for  separately  recognized
     servicing assets and servicing liabilities.  SFAS 156 permits the choice of
     the amortization  method or the fair value measurement method, with changes
     in fair value recorded in income,  for the subsequent  measurement for each
     class of separately recognized servicing assets and servicing  liabilities.
     The statement is effective for years  beginning  after  September 15, 2006,
     with earlier  adoption  permitted.  The adoption of SFAS 156 did not have a
     material  effect  on  the  consolidated  financial  position,   results  of
     operations or cash flows of the Company.

     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 June 2006, the EITF reached a consensus on Issue No. 06-3 ("EITF 06-3"),
     " Disclosure Requirements for Taxes Assessed by a Governmental Authority on
     Revenue-Producing  Transactions ." The consensus allows companies to choose
     between two acceptable  alternatives based on their accounting policies for
     transactions   in  which  the  company   collects  taxes  on  behalf  of  a
     governmental authority,  such as sales taxes. Under the gross method, taxes
     collected  are  accounted  for as a  component  of  sales  revenue  with an
     offsetting expense.  Conversely, the net method allows a reduction to sales
     revenue.  If such taxes are reported gross and are  significant,  companies
     should  disclose the amount of those taxes.  The guidance should be applied
     to financial  reports  through  retrospective  application  for all periods
     presented,  if amounts are  significant,  for interim and annual  reporting
     beginning  after December 15, 2006 with early adoption is permitted.  We do
     not  expect  the  adoption  of EITF 06-3 to have a  material  effect on the
     consolidated financial position, results of operations or cash flows of the
     Company.

                                                                              13
<PAGE>

                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006




     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
     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.

                                                                              14
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006




     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.




                                                                              15


<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 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 50.2% and 71.5%
of our  revenue  for the three  month  periods  ended  March 31,  2007 and 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, 365 days a year.  Electronic

                                                                              16
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES





Data Systems  Corp.  ("EDS"),  accounted  for  approximately  45.9% and 26.5% of
revenue for the three months ended March 31, 2007 and 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
not deliver the  undelivered  products or services and it is probable  that such
amount is collectible;

                                                                              17
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES





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 March  31,  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 months ended March 31,
2007 and 2006, respectively.

                                                                              18
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                      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 and we also changed the method of
accounting for registration rights agreements following the guidance of the FASB
Staff Position EITF 00-19-2 ("FSP EITF 00-19-2") as further described in Notes 2
and 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  months  ended  March 31, 2007 we had income  from  operations  of
$463,000  compared to a loss from  operations  of $292,000 in the same period in
2006.  We had net income of $402,000  for the three  months ended March 31, 2007
compared to a net loss of $533,000  for the three  months  ended March 31, 2006.
The  significant  improvement  in  operating  results is due to an  increase  in
revenue and cost reductions as further discussed below.

For the three months ended March 31, 2007 revenue increased  $239,000 (11.9%) to
$2,254,000  compared to revenue of $2,015,000 for the same period in 2006.  This
increase is primarily  the result of an increase in our core  business,  the ASP
IOL services,  of $105,000 (6.7%) and an increase of $134,000 (29.3%) in revenue
from engineering services.  The increase in the ASP services and the engineering
services revenue is the result of further  expansion of our services to existing
accounts.  We anticipate that revenue from engineering 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  decreased by $188,000 (17.7%) to
$875,000  for the  three  months  ended  March  31,  2007  compared  to costs of
$1,063,000  for the three  months  ended March 31,  2006.  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

                                                                              19
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES





personnel wages and benefit costs of $148,000 from staff reductions,  a decrease
in rents of $69,000,  offset by an increase in professional fees of $37,000. All
other operating expenses decreased $8,000, net.

Sales and  marketing  costs were  $337,000  for the three months ended March 31,
2007, a decrease of $126,000 or 27.2% compared to costs of $463,000 for the same
period in 2006.  Personnel  and related  benefit costs  decreased  $145,000 as a
result of staff reductions,  and rent decreased  $25,000.  This was offset by an
increase in travel costs of $20,000 and professional fees of $21,000 while other
sales and marketing costs increased by $3,000.

General and administrative  costs decreased $201,000 (29.0%) to $493,000 for the
three  months  ended March 31, 2007  compared to costs of $694,000  for the same
period in 2006. Salaries and related benefits decreased $42,000,  rent decreased
$38,000 and legal and accounting fees decreased $44,000 principally due to costs
incurred  for a  registration  statement  in 2006.  Directors'  fees and meeting
expenses decreased $30,000 resulting from fewer meetings in the first quarter of
2007 compared to 2006.  Travel expenses  decreased $11,000 and professional fees
decreased by $10,000. All other administrative costs decreased $26,000.

Interest  expense,  net  decreased  $147,000  (81.2%)  principally  due  to  the
amortization of debt discount of $125,000 in the first quarter of 2006 which was
fully  amortized  in 2006,  and a  decrease  in  interest  due to lower  rate of
borrowing under our receivables financing agreements.

Other  expense  decreased  $60,000 in the first  quarter of 2007 compared to the
same period in 2006. In 2006 the Company  incurred  penalties in connection with
the Sigma Capital bridge  financing and the marked to market  adjustment for the
fair value of the  warrant  liability  recorded in  connections  with the bridge
financing. The bridge financing was repaid in 2006.

Financial Condition and Liquidity

For the  three  months  ended  March 31,  2007,  we had net  income of  $402,000
compared to a net loss of $533,000 for the same period in 2006. Cash provided by
operations  was  $625,000  in the first  three  months of 2007  compared to cash
provided by operations  of $220,000 for the same period in 2006, an  improvement
of $405,000.

Cash provided by operations  for the three months ended March 31, 2007 consisted
of the net income of  $402,000,  increased  by non-cash  expenses  of  $139,000,
including  depreciation  and  amortization of property and equipment of $86,000,
and stock-based compensation expense of $53,000. In addition accounts receivable
decreased by $235,000 and prepaid expenses decreased $41,000. This was offset by
a decrease in deferred  revenue of $184,000  and a decrease in accounts  payable
and other current liabilities of $8,000.

Cash used in investing  activities  was $49,000 for the three months ended March
31,  2007,  compared to $24,000 for same  period in 2006.  This was  principally
expenditures for equipment.

Cash used in financing  activities  totaled  $354,000 for the three months ended
March 31, 2007,  compared to cash used in financing  activities  of $487,000 for
the three months ended March 31, 2006. We repaid  $36,000 of long-term  debt and
capital  lease  obligations  in the  first  quarter  of  2007  and  the  balance
outstanding under short term revolving loans for receivables financing decreased
by $232,000 in 2007.  We also repaid the Sterling Bank line of credit of $86,000
during the first quarter of 2007.

                                                                              20
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES




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, 2007 and the year ended  December
          31, 2006 we had net cash provided by continuing operations of $631,000
          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    The  Company  and the  holders of the Series A and Series B  Preferred
          stock  have  previously  agreed to defer  payment of  dividends  until
          February  1,  2006 and April 15,  2006,  respectively.  We may seek to
          defer these  dividends  further.  Management  believes that,  based on
          advice of counsel,  we are  precluded  from paying these  dividends at
          this time pursuant to Delaware General Corporate Law.

     o    We may raise  additional  capital through private equity offerings and
          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.

     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 2004
          we entered  into a new  agreement  to  provide  IOL  services  to EDS.
          Revenue from EDS  accounted  for 45.9% of total  revenue for the three
          months ended March 31, 2007. Management  anticipates that revenue from
          this customer will continue to increase in 2007 and beyond and expects
          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 three  months ended March 31,
          2007,  operating  costs  decreased  $516,000,  or  22.4%  compared  to
          operating  costs for the first  quarter of 2006.  We will  continue to
          seek ways to control and reduce costs.

     o    We continue to expand our  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.

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, 2008.  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.

                                                                              21
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                      DIRECT INSITE CORP. AND SUBSIDIARIES








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 March 31, 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
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 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 expects to engage  outside  consultants  to design and implement
this plan.

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.

                                                                              22
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES





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 three
months ended March 31, 2007.

                                                                              23

<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

     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.


                                                                              24
<PAGE>

                      DIRECT INSITE CORP. AND SUBSIDIARIES

                                   SIGNATURES



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




DIRECT INSITE CORP.




/s/  James A. Cannavino
------------------------------------------------------
James A. Cannavino, Chief Executive Officer                May 14, 2007



/s/ Michael J. Beecher
------------------------------------------------------
Michael J. Beecher,  Chief Financial Officer               May 14, 2007

                                                                              25