UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                  FORM 10-QSB
                                   (Mark One)


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


               For the quarterly period ended September 30, 2003

                                       OR

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


                For the transition period from ______ to ______

                         Commission File No. 0 - 20660


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


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


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


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

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

                 Yes  [X]               No [ ]


The number of shares of $.0001 par value  stock  outstanding  as of  December 9,
2003 was: 4,069,953.

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

<PAGE>

                      DIRECT INSITE CORP. AND SUBSIDIARIES

                                     INDEX


PART I - FINANCIAL INFORMATION                                      Page
Item 1

  Condensed Consolidated Balance Sheets as of September 30, 2003
  (Unaudited) and December 31, 2002                                   3

  Unaudited Condensed Consolidated Statements of Operations and
  Comprehensive Loss For the Three and Nine Months Ended
  September 30, 2003 and 2002                                         4

  Unaudited Condensed Consolidated Statements of Cash Flows
  For the Nine Months Ended September 30, 2003 and 2002               5

  Notes to Unaudited Condensed Consolidated Financial Statements    6 - 14

Item 2

  Management's Discussion and Analysis or Plan of Operations        15 - 18

Item 3

  Controls and Procedures                                             18

PART II - OTHER INFORMATION

Item 1. Legal Proceedings                                             19

Item 2. Changes in Securities                                         19

Item 3. Defaults Upon Senior Securities                               19

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

Item 5. Other Information                                             19

Item 6. Exhibits and Reports on Form 8-K                              19

Signatures                                                            20

CERTIFICATIONS                                                      21 - 24
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                 AS OF SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
                       (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                 September 30,         December 31,
                                                                                      2003                 2002
                                                                              -----------------     -----------------
                                                                                  (Unaudited)            (Audited)
<S>                                                                           <C>                   <C>
ASSETS
Current assets
  Cash and cash equivalents                                                    $             71     $             700
  Accounts receivable, net of allowance for doubtful accounts of
   $38 and $42 in 2003 and 2002, respectively                                             1,367                 1,350
  Stock subscription receivable                                                               -                   500
  Prepaid expenses and other current assets                                                 199                   239
                                                                               ----------------     -----------------
       Total current assets                                                               1,637                 2,789

Software costs, net                                                                         344                   444
Property and equipment, net                                                                 955                 1,166
Other assets                                                                                418                   492
                                                                               ----------------     -----------------
                                                                               $          3,354     $           4,891
                                                                               ================     =================
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
  Accounts payable and accrued expenses                                        $          2,000    $            1,669
  Due to bank                                                                               798                   690
  Deferred revenue                                                                          180                   252
  Current portion of long-term debt                                                         759                   396
                                                                               ----------------     -----------------
       Total current liabilities                                                          3,737                 3,007
Long term debt, net of current portion
                                                                                             70                   616
Dividends payable                                                                           287                    56
                                                                               ----------------     -----------------
       Total liabilities                                                                  4,094                 3,679
                                                                               ----------------     -----------------
Commitments and contingencies

Shareholders' equity
  Preferred stock, $0.0001 par value; 2,000,000 shares authorized;
     Series A Convertible Preferred, 134,680 and 116,823 issued and
     outstanding in 2003 and 2002, respectively; liquidation preference
     of $2,750,000 and $2,500,000 in 2003 and 2002, respectively;                             -                     -
     Series B Redeemable Preferred, 974 issued and outstanding in 2003;
     liquidation preference of $974,075 in 2003                                               -                     -
  Common stock, $0.0001 par value; 50,000,000 and 150,000,000
     shares authorized in 2003 and 2002 respectively;
     4,099,880 and 3,966,055 shares issued in 2003 and 2002,
     respectively; and 4,059,953 and 3,926,128 shares outstanding
     in 2003 and 2002, respectively                                                           -                     -
  Additional paid-in capital                                                            110,092               108,708
  Accumulated deficit                                                                  (110,463)             (107,081)
  Subscriptions receivable
                                                                                            (41)                  (62)
  Accumulated other comprehensive loss                                                        -                   (25)
                                                                               ----------------     -----------------
                                                                                           (412)                1,540
  Common stock in treasury, at cost  - 24,371 shares                                       (328)                 (328)
                                                                               ----------------     -----------------
       Total shareholders' equity                                                          (740)                1,212
                                                                               ----------------     -----------------

                                                                               $          3,354     $           4,891
                                                                               ================     =================
</TABLE>

See notes to condensed consolidated financial statements.

                                       3
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED STATEMENTS OF
                       OPERATIONS AND COMPREHENSIVE LOSS
                                   (Unaudited)

 FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 and 2002 (in thousands,
                             except per share data)

<TABLE>
<CAPTION>
                                                    Three Months Ended              Nine Months Ended
                                                    ------------------              -----------------
                                                       September 30,                  September 30,
                                                       -------------                  -------------
                                                    2003           2002            2003           2002
                                               --------------- -------------- --------------- --------------
   <S>                                         <C>             <C>                    <C>     <C>

   Revenue                                     $       2,085   $       1,851  $       6,354   $       5,348
                                               -------------   -------------  -------------   -------------

   Costs and expenses
     Operations, research and development                              1,189                          3,335
                                                       1,191                          3,756
     Sales and marketing                                                              2,255           1,793
                                                         676             643
     General and administrative
                                                         841             987          2,645           2,929
     Amortization and depreciation                       219             212            660             699
                                               -------------   -------------  -------------   -------------
                                                       2,927           3,031          9,316           8,756
                                               -------------   -------------  -------------   -------------
   Operating loss                                       (842)         (1,180)        (2,962)         (3,408)

   Other expenses
     Loss on sales of NetWolves common
        stock                                              -             (14)             -            (264)
     Other-than-temporary decline in
        Investment in NetWolves                            -               -              -            (457)
     Equity in Loss of Voyant and Valuation
       Adjustment                                          -            (281)
                                                                                          -            (603)
     Interest expense, net                               (70)            (52)          (231)           (140)
                                                         (25)             40            (66)             40
                                               -------------   -------------  -------------   -------------
   Loss before benefit from income taxes                (937)         (1,487)        (3,260)         (4,832)

   Benefit from income taxes                             109               -            109               -
                                               -------------   -------------  -------------   -------------

   Net loss                                             (828)         (1,487)        (3,151)         (4,832)


   Preferred stock dividends                            (102)              -           (231)              -
                                               -------------   -------------  -------------   -------------

   Net loss attributable to
        common shareholders                     $       (930)  $      (1,487) $      (3,382)  $      (4,832)
                                                ============   =============  =============   =============
   Other comprehensive income
      Reclassification adjustment and
      unrealized gain on marketable
      securities                                           -             (54)             -             (54)
                                               -------------   -------------  -------------   -------------
   Comprehensive loss                           $       (930)  $      (1,541) $      (3,382)  $      (4,886)
                                                ============   =============  =============   =============

   Basic and diluted net loss attributable
     to common shareholders  per share         $       (0.23)  $       (0.39) $       (0.85)  $       (1.37)
                                                ============   =============  =============   =============
   Basic and diluted  weighted average common
   shares outstanding                                  4,029           3,847          3,979           3,532
                                                ============   =============  =============   =============
</TABLE>

See notes to condensed consolidated financial statements.

                                       4
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                        For the Nine months ended
                                                                                              September 30,
                                                                                   -------------------------------------
                                                                                         2003               2002
                                                                                   ----------------- -------------------
                                                                                              (In thousands)
<S>                                                                                <C>                <C>
Cash flows from operating activities
 Net loss                                                                          $         (3,151)  $        (4,832)
  Adjustments to reconcile net loss to net cash used in
   operating activities
    Depreciation and amortization
       Property and equipment
       Software costs                                                                           559               610
       Other                                                                                    100                87
                                                                                                  2                 -
    Provision for doubtful accounts                                                              88                56
    Loss on sales of NetWolves common stock                                                       -               264
    Other-than-temporary decline in Investment in NetWolves                                       -               457
    Equity in loss of Voyant  and Valuation Adjustment                                            -               603
    Common stock and options issued for services                                                 175              671
     Common stock issued for settlement of restructuring charges                                   -               50
     Other                                                                                        25                -
  Changes in operating assets and liabilities
    Accounts receivable                                                                         (117)            (336)
    Prepaid expenses and other current assets                                                     40              733
    Other assets                                                                                  72               40
    Accounts payable and accrued expenses                                                        338              (41)
    Restructuring costs payable                                                                    -             (386)
    Deferred revenue                                                                            (60)              763
                                                                                   ----------------- -------------------
             Net cash used in operating activities                                           (1,929)           (1,261)
                                                                                   ----------------- -------------------
Cash flows used in investing activities
  Proceeds from the sale of NetWolves common stock                                                -               282
  Advances to Voyant                                                                              -              (465)
  Capital expenditures                                                                         (309)             (351)
                                                                                   ----------------- -------------------
                                                                                               (309)             (534)
                                                                                   ----------------- -------------------
Cash flows from financing activities
      Proceeds from Bank advances, net                                                          108               299
      Proceeds from the sale of preferred stock, net of fees                                    727                 -
      Proceeds from line of credit                                                              500                 -
      Proceeds from common stock and subscription receivable                                     21               573
      Consideration paid in connection with the sale of common stock                              -                (3)
      Proceeds from long term debt, net of fees                                                 496               250
      Repayments of long-term debt                                                             (243)             (119)
                                                                                   ----------------- -------------------
             Net cash provided by financing activities                                        1,609             1,000
                                                                                   ----------------- -------------------
Net decrease in cash and cash equivalents                                                     (629)              (795)

Cash and cash equivalents, beginning of period                                                 700              1,359
                                                                                   ----------------- -------------------
Cash and cash equivalents, end of period                                           $            71   $            564
                                                                                   ================= ===================



Non-cash investing and financing activities:

Conversion of long-term debt into 974 shares of
     Series B Redeemable Preferred Stock                                           $           974   $               -
                                                                                   ================= ===================

</TABLE>

See notes to condensed consolidated financial statements.

                                       5
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

        FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002


1.   Interim Financial Information

     The condensed  consolidated balance sheet as of September 30, 2003, and the
     condensed consolidated  statements of operations and comprehensive loss and
     cash flows for the periods  ended  September  30, 2003 and 2002,  have been
     prepared by the Company without audit.  These interim financial  statements
     include all  adjustments,  consisting  only of normal  recurring  accruals,
     which  management  considers  necessary  for a  fair  presentation  of  the
     financial  statements.  The results of operations for the quarterly  period
     ended  September 30, 2003, are not  necessarily  indicative of results that
     may be expected for any other interim period or for the full year.

     These unaudited condensed  consolidated financial statements should be read
     in conjunction with the consolidated financial statements and notes thereto
     for the year ended  December  31, 2002.  The  accounting  policies  used in
     preparing these unaudited condensed  consolidated  financial statements are
     consistent  with those  described  in the  December  31, 2002  consolidated
     financial statements.


2.   The Company

     Direct Insite Corp. and subsidiaries (the "Company")  primarily operates as
     an application  service provider ("ASP") and markets an integrated "fee for
     services"  offering  providing high volume processing of transactional data
     for billing purposes, electronic invoice presentation and payment ("EIP&P")
     as well as visual data  analysis  and  reporting  tools  delivered  via the
     Internet for our customers.  The Company's core technology is d.b.Express?,
     the proprietary and patented  management  information  tool, which provides
     targeted access through the mining of large volumes of  transactional  data
     via the Internet.  In 2001 the Company  acquired  Platinum  Communications,
     Inc.  ("Platinum"),  a Dallas,  Texas  based  company,  which  markets  its
     integrated  proprietary back office software solutions,  Account Management
     Systems   ("AMS"   or   sometimes   referred   to   as   "TAMS")   to   the
     telecommunications  industry either as a license or as an ASP. Further,  as
     an added  source of revenue,  the Company  began in 2001 to provide  custom
     engineering services to its customers.

     This suite of  services  enables  the  Company  to provide a  comprehensive
     Internet  delivered service from the raw transaction  record through all of
     the internal  workflow  management  processes  including an  electronically
     delivered  invoice with  customer  analytics.  This  comprehensive  service
     offering  provides  back office  operations,  cuts costs and  provides  for
     improved customer service by providing the end customer with easy access to
     all of the  detailed  information  about their bill.  The Company  operates
     fully  redundant data centers  located at its main office in Bohemia,  N.Y.
     and  in  Newark,   N.J.  The  facility  in  New  Jersey  is  leased  at  an
     International Business Machines ("IBM"), e- business Hosting Center.

     Management's  liquidity plans are discussed in Note 8. As described in Note
     7, the Company has one major  customer that  accounted for more than 91% of
     the Company's  revenue for the nine- month period ended September 30, 2003.
     Loss of this customer would have a material adverse effect on the Company.

     In August,  2003,  the Company  executed an employment  agreement  with its
     president.  The terms of the agreement indicate he shall serve as president
     until August 15, 2004 and  thereafter  as a consultant to the Company until
     February 15, 2007. Compensation while serving as president will be $240,000
     per annum. Additionally,  he was granted options to purchase 200,000 shares
     of the  Company's  common  stock,  150,000  vesting  upon  execution of the
     agreement with the balance fully vesting by January 1, 2004.  These options
     have an  exercise  price  of $1.16  per  share.  Further,  in  addition  to
     reimbursement  of reasonable out of pocket  business  expenses,  during his
     term as president he will be entitled to living and travel  expenses not to
     exceed  $3,100 per month.  During the  consulting  period ( August 16, 2004


                                       6
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

        FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

     through  February 15, 2007) he will be required to consult with the Company
     and its senior executive officers  regarding its respective  businesses and
     operations. Such consulting services shall not require more than 48 days in
     any calendar  year,  or more than four days in any month.  The Company will
     pay $12,000 per month Compensation  during the consulting  period.

     New Accounting Pronouncements
     -----------------------------

     Statement of Financial  Accounting  Standards ("SFAS") No.146,  "Accounting
     for Costs Associated with Exit or Disposal  Activities",  provides guidance
     on the  recognition and measurement of liabilities for cost associated with
     exit or disposal activities. The provisions of this statement are effective
     for exit or disposal activities that are initiated after December 31, 2002.
     The adoption of SFAS No.146 did not have a material effect on the Company's
     consolidated financial statements.

     In January 2003, the Financial  Accounting  Standards Board ("FASB") issued
     Interpretation  No. 46 ("FIN  46"),  "Consolidation  of  Variable  Interest
     Entities,  an  Interpretation  of ARB  No.  51."  FIN 46  requires  certain
     variable interest entities to be consolidated by the primary beneficiary of
     the  entity  if  the  equity  investors  in the  entity  do  not  have  the
     characteristics  of  a  controlling  financial  interest  or  do  not  have
     sufficient equity at risk for the entity to finance its activities  without
     additional  financial  support from other parties.  FIN 46 is effective for
     all new variable  interest  entities  created or acquired after January 31,
     2003. For variable  interest entities created or acquired prior to February
     1, 2003,  the provisions of FIN 46 must be applied for the first interim or
     annual period  beginning  after  September 15, 2003. The adoption of FIN 46
     did not have a  material  effect on the  Company's  consolidated  financial
     statements.

     In May  2003,  the  FASB  issued  SFAS No.  150,  "Accounting  for  Certain
     Financial Instruments with Characteristics of both Liabilities and Equity,"
     which  establishes  standards  for  how an  entity  that  issues  financial
     instruments  (or may be required under the terms of a financial  instrument
     to issue its equity  shares)  classifies  and measures in its  statement of
     financial  position certain financial  instruments with  characteristics of
     both  liabilities  and equity.  The adoption of SFAS No. 150 did not have a
     material effect on the Company's consolidated financial statements.

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

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

                                                                    Three Months Ended         Nine Months Ended
                                                                      September 30,              September 30,
                                                                --------------------------- -------------------------
                                                                   2003          2002           2003         2002
                                                                ------------ -------------- ------------- -----------
     <S>                                                          <C>          <C>            <C>          <C>
     Net loss attributable to common shareholders
      As reported                                                   $(930)     $(1,487)       $(3,382)     $(4,832)
      Less:  Stock-based employee compensation
       expense determined under fair value-based
       method for all awards                                         (278)      (1,033)          (859)      (1,437)
                                                                  -------      -------        -------      -------
      Pro forma                                                   $(1,208)     $(2,520)       $(4,241)     $(6,269)
                                                                  =======      =======        =======      =======
     Basic and diluted net loss per share
      As reported                                                  $(0.23)      $(0.39)        $(0.85)      $(1.37)
                                                                  =======      =======        =======      =======
      Pro forma                                                    $(0.30)      $(0.66)        $(1.07)      $(1.77)
                                                                  =======      =======        =======      =======
</TABLE>

                                       7
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

        FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002


     The fair value of Company  common stock  options  granted to employees  are
     estimated on the date of grant using the Black-Scholes option-pricing model
     with the following assumptions:  (1) expected volatility ranging from 63.4%
     to 71.5% in 2003 and from 67.7% to 68.9% in 2002,  (2)  risk-free  interest
     rates  of 4.25% in 2003  and  4.80% in 2002 and (3)  expected  lives of 2.0
     years to 5.2 years in 2003 and 3.0 years to 5.0 years in 2002.

3.   Accounts Receivable and Due To Bank

     In 2001, the Company entered into 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 primary  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 September 30, 2003, the Company had assigned  approximately  $997,000 of
     accounts  receivable to the Bank and received advances of $798,000 from the
     Bank.

4.   Software costs

     During the third quarter of 2003 the Company's  management  determined that
     the software acquired in the Platinum acquisition, valued at $344,000 as at
     September  30, 2003,  might be greater than its fair value.  The Company is
     currently  negotiating a new sales agreement  related to this software.  In
     order to finalize the  determination  of the fair value of the software the
     Company  must  complete  its sales  negotiation.  The  Company  anticipates
     completing  the  negotiation  and fair  value  analysis  during  the fourth
     quarter of 2003.  The carrying  value of the software may be  significantly
     reduced in the near term depending upon the results of the negotiation.


5.   Long Term Debt

Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
                                                                               September 30,        December 31,
                                                                                    2003                2002
                                                                             ------------------- ----------------
       <S>                                                                          <C>                 <C>

       Lines of credit (a)                                                          $   605             $   133
       Capitalized lease obligations (b)                                                224                 319
       Term Loan  - Chief Executive Officer (c)                                           -                 250
       Installment Note - Markus & Associates (d)                                         -                 250
                                                                                    -------             -------
                                                                                        829                 952
       Less current portion                                                            (759)               (396)
                                                                                    -------             -------
       Long-term debt, net of current portion                                       $    70             $   556
                                                                                    =======             =======
</TABLE>

(a)  The Company has four lines of credit with various expiration dates. In June
     2003, the Company  obtained a  discretionary  Line of Credit ("LoC") in the
     amount  of  $500,000  from JP  Morgan  Private  Bank  ("JPMC").  The LoC is
     guaranteed by Tall Oaks Group,  LLC, and is repayable the earlier of demand

                                       8
<PAGE>

     or June 30, 2005.  The LoC permitted two forms of draw down; one based upon
     prime rate, the second based upon LIBOR.  In July 2003, the Company elected
     to draw down  $500,000  applying  the terms  and  conditions  set forth for
     LIBOR.  The interest  rate is the JPMC reserve  adjusted  LIBOR plus 2.30%.
     This obligation matures six months from date borrowed.  The second line has
     an  expiration  date of July 30,  2006,  bears an interest  rate of 10%, is
     collateralized   by  substantially  all  the  assets  of  Platinum  and  is
     personally guaranteed by one of the former officers of Platinum.  The third
     line  is  payable  on  demand,  bears  an  interest  rate of 10% and has no
     available  balance.  The fourth line contains no expiration  date, bears an
     interest rate of 16.25% and has no available balance.

(b)  The Company has  equipment  under  capital  lease  obligations  expiring at
     various times through 2006. 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 assets are  included  in
     property and equipment.

(c)  In January 2002, the Company's Chairman and current Chief Executive Officer
     loaned  the  Company  $250,000.  The loan had a term of  three  years  with
     interest at 5%, payable  quarterly in arrears.  In June 2003, the loan plus
     accrued interest,  aggregating  $266,000,  was converted into 266 shares of
     the Company's Series B Redeemable Preferred Stock,  ("Series B Preferred").
     See Note 6.

(d)  In December 2002, the Company  executed a $250,000 note payable to Markus &
     Associates (an affiliate of S.J. & Associates, Inc.). This note was payable
     in 28 equal monthly  installments of principal plus interest at 9-1/2%.  In
     June 2003,  the loan balance of $208,000 was  converted  into 208 shares of
     the Company's Series B Preferred stock. See Note 5.


6.   Shareholders' equity

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

     In  September  2002,  the  Company  sold  93,458  shares  of its  Series  A
     Convertible  Preferred  Stock,  ("Preferred  Stock") in  consideration  for
     $2,000,000  less fees and  expenses  of $178,000  to  Metropolitan  Venture
     Partners II, L.P.  ("Metropolitan"),  a private equity  investment firm. In
     December  2002,  the Company sold 23,365 shares of its  Preferred  Stock in
     consideration   for  $500,000  less  fees  and  expenses  of  $61,000,   to
     Metropolitan.  The proceeds from this  transaction were received January 3,
     2003,  and, as of December 31, 2002,  the  principal  sum was  reflected as
     stock subscription receivable. In June 2003, the Company sold 17,857 shares
     of its Series A Convertible  Preferred Stock in consideration  for $250,000
     less fees and expenses of $5,000 to Metropolitan.  The holders of Preferred
     Stock ("the Holders") are entitled to dividends,  on a cumulative basis, at
     the rate of 9-1/2 per annum,  compounded  quarterly and payable on February
     1, 2005 and September 25, 2005.The payment of first dividend was originally
     scheduled  for  September  25, 2003,  however,  the Company and the Holders
     agreed to defer this payment until February 1, 2005. As  consideration  for
     the deferral of the dividend payment, the Company agreed to pay the Holders
     a premium of 7.5% of the dividend.  Dividends are payable, at the option of
     the  holders,  in cash or in the  Company's  common  stock.  Each  share of
     Preferred  Stock is  convertible  into 10 shares of  common  stock,  at the
     option of the  holder.  The  holders  have  certain  demand  and  piggyback
     registration  rights, have preference in the event of liquidation,  and are
     entitled to ten votes for each share of  Preferred  Stock on all matters as
     to which  holders of common stock are entitled to vote. As of September 30,
     2003, $287,000 in dividends are payable to the holders

     The  managing  partner of  Metropolitan  was  appointed  as a member of the
     Company's Board of Directors in September 2002.

     In June 2003, the Company's Board of Directors approved the exchange of the
     then  outstanding  obligations to its Chairman and current Chief  Executive
     Officer,  Markus &  Associates  and Tall Oaks Group,  LLC for 974 shares of
     Series B Preferred  Stock at an exchange  ratio of $1,000 of debt per share
     ("Price Per Share"). The Series B Preferred was issued as follows:

                                       9
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

        FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002



     --   266 shares  were  exchanged  for  $266,000 of debt  obligation  to the
          Company's Chairman and current Chief Executive Officer;
     --   208 shares were exchanged for $208,000 of debt  obligation to Markus &
          Associates; and
     --   500 shares were exchanged for $500,000 of debt obligation to Tall Oaks
          Group, LLC.

     Each of the Series B Preferred  shares is entitled to mandatory  dividends,
     payable  quarterly,  commencing  on the first day of the  calendar  quarter
     after the date of issuance, at the rate of 12% per annum. Additionally, the
     Series  B  Preferred  shares  are  redeemable,  at the sole  option  of the
     Company,  on or after  March 31,  2005 (or prior to March 31, 2005 with the
     consent of majority-in-interest holders of Series B Preferred shares). Upon
     redemption,  the  holders of the  Series B  Redeemable  Preferred  shall be
     entitled  to  receive,  for each  share of  Series B  Redeemable  Preferred
     outstanding, an amount equal to the Price Per Share plus accrued and unpaid
     dividends.

     Earnings Per share
     ------------------

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

     Securities that could potentially dilute basic EPS in the future, that were
     not included in the  computation  of the diluted EPS because to do so would
     have been antidilutive for the periods presented,  consist of the following
     (in thousands):
<TABLE>
       <S>                                                                      <C>
       Options to purchase common stock                                         3,352
       Convertible preferred stock                                              1,347
                                                                                -----

             Total potential common shares as of September 30, 2003             4,699
                                                                                =====
       Issuances after September 30, 2003 through December 9, 2003
          Common stock issued                                                      10
          Options to purchase common stock granted                                400
                                                                                -----
          Total Common shares and options issued October 1, 2003 through
       December 9, 2003                                                           410
                                                                                =====
</TABLE>
     Common Stock and Options Issuances
     ----------------------------------

     During the quarter  ended  September  30, 2003,  the Company  issued 37,281
     shares of its common  stock and options to purchase  535,000  shares of its
     common stock as detailed below:

     --   Pursuant to an employment  agreement with its Chief Executive  Officer
          dated January 25, 2003, the Company issued 15,000 shares of its common
          stock valued at $16,000.

     --   In lieu of cash, for the three month period ended  September 30, 2003,
          the Company issued 22,281 shares of its common stock valued at $26,000
          to the Company's Board of Directors for Board fees.

     --   The Company  granted  225,000 options to purchase shares of its common
          stock to certain  employees  and a Board  member of the  Company.  The
          options were fully vested upon issuance,  can only be exercised during
          the period March 31, 2005 to April 1, 2006 and have an exercise  price
          of $1.26 per share.

                                       10
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

        FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

     --   The Company  granted 45,000  options to purchase  shares of its common
          stock to a certain  employee of the  Company.  The options  vest 9,000
          upon  issuance  and 3,000 per month for the months of January  through
          December 2004, and have an exercise price of $0.75 per share.
     --   The Company  granted 15,000  options to purchase  shares of its common
          stock to a certain  employee of the  Company.  The options  vest 3,000
          upon  issuance  and 1,000 per month for the months of January  through
          December 2004, and have an exercise price of $0.75 per share.
     --   The Company,  pursuant to an employment  agreement executed in August,
          2003,  granted  200,000 options to purchase shares of its common stock
          to the  president of the Company.  The options will be fully vested by
          December 31, 2003, and have an exercise price of $1.16 per share.
     --   The Company  granted 25,000  options to purchase  shares of its common
          stock to a certain employee of the Company.  The options vest 20% upon
          issuance,  20% December 31, 2003,  20% June 30, 2004, 40% December 31,
          2004 and have an exercise price of $0.75 per share.
     --   The Company  granted 25,000  options to purchase  shares of its common
          stock to a certain employee of the Company.  The options vest 20% upon
          issuance,  20% December 31, 2003,  20% June 30, 2004, 40% December 31,
          2004 and have an exercise price of $0.95 per share.

     Subsequent to September 30, 2003:

     --   The Company,  pursuant to an extended  employment  agreement  with its
          Chief Executive Officer, granted 360,000 options. See Note 10.
     --   The Company  granted  25,000  options to an  employee,  vesting  5,000
          vested on issuance, 5,000 12/31/03, 5,000 3/31/2004,  5,000 6/31/2004,
          5,000 10/31/2004, with an exercise price of $1.10 per share
     --   The Company granted 15,000 to an employee,  all options are vested but
          can be exercised  during the period July 1, 2005 and July 1, 2007. The
          exercise price is $1.10 per share.

During the quarter ended June 30, 2003,  the Company issued 76,851 shares of its
common  stock and  options to  purchase  389,000  shares of its common  stock as
detailed below:


     --   Issued  17,654 net  shares of its  common  stock as payment of certain
          consulting expenses, valued at $15,000.
     --   Pursuant to an employment  agreement with its Chief Executive  Officer
          dated January 25, 2003, the Company issued 15,000 shares of its common
          stock valued at $20,000.
     --   In lieu of cash,  for the six month period  ended June 30,  2003,  the
          Company  issued 44,197 shares of its common stock valued at $57,000 to
          the Company's Board of Directors for Board fees.
     --   The Company  granted  180,000 options to purchase shares of its common
          stock  to  certain  employees  of the  Company.  The  options  vest in
          one-third  increments on April 30, 2004,  April 30, 2005 and April 30,
          2006 and have an exercise price of $1.20 per share.
     --   The Company  granted  200,000 options to purchase shares of its common
          stock to an employee of the Company.  The options,  having an exercise
          price of $1.40, vested upon issuance, but may only be exercised during
          the period March 31, 2005 to April 01, 2006.  The employee is also the
          Managing Partner and principal owner of Tall Oaks.
     --   The Company  granted  9,000  options to purchase  shares of its common
          stock to three employees of the Company. The options vest in one-third

                                       11
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

        FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002


          increments:  on the date of  issuance,  December 31, 2003 and June 30,
          2004. The options have an exercise price of $1.30 per share.


During the quarter ended March 31, 2003, the Company issued 19,693 shares of its
common stock and options to purchase 272,500 shares of its common stock as
detailed below:

     --   Issued  9,693  shares  of its  common  stock  as  payment  of  certain
          consulting  expenses,  valued at  $20,000.
     --   In December 2002, the Company's  Chairman  became the Company's  Chief
          Executive  Officer.  In January  2003,  the  Company  entered  into an
          employment  agreement with its Chief Executive Officer,  which expires
          in January  2005.  As part of the  compensation,  the Chief  Executive
          Officer will receive 60,000 shares of the Company's common stock which
          vest  ratably  over  the  first  twelve   months  of  the   agreement.
          Accordingly,  during the  quarter  ended March 31,  2003,  the Company
          issued   10,000   shares  of  its  common  stock  valued  at  $18,000.
          Additionally,  as  part of his  compensation  he was  granted  240,000
          options to  purchase  common  stock of the Company at $2.02 per share,
          which was above the market price on the date of  issuance.  50% of the
          options vested upon execution of the agreement;  the balance will vest
          ratably during the term of the agreement.
     --   The Company  granted 30,000  options to purchase  shares of its common
          stock to  certain  members  of its  Board of  Directors  for  services
          rendered in their  capacity  as Board  members.  The  options  vest on
          December 31, 2003 and have an exercise price of $2.00 per share.
     --   The Company  granted  2,500  options to purchase  shares of its common
          stock to an employee of the Company.  The options,  having an exercise
          price of $1.85,  vest in  one-third  increments  on February 28, 2003,
          June 30, 2003 and June 30, 2004.

7.   Reclassifications

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

8.   Products and Services

     The Company and its subsidiaries  currently operate in one business segment
     and provide  three  separate  products:  ASP services,  custom  engineering
     services and AMS services.
<TABLE>
<CAPTION>
                                                   Three Months Ended               Nine Months Ended
                                                     September 30,                    September 30,
                                                  2003            2002            2003            2002
                                             --------------- --------------- --------------- ----------------
            <S>                                   <C>            <C>               <C>           <C>

            ASP fees                              $   1,477       $   1,195        $  4,149       $   3,128
            Custom engineering fees                     557             458           1,779           1,682
            AMS fees                                     51             198             426             538
                                                  ---------       ---------        --------       ---------
                 Total Revenue                    $   2,085       $   1,851        $  6,354       $   5,348
                                                  =========       =========        ========       =========
</TABLE>

     Major customer
     --------------

     For the three months ended September 30, 2003 and 2002, the Company had one
     major  customer that  accounted for 96.3% and 88.1% of the Company's  total

                                       12
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

        FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

     revenue,  respectively.  For the nine months ended  September  30, 2003 and
     2002,  this major  customer  accounted for 91.6% and 88.4% of the Company's
     total  revenue,  respectively.   Accounts  receivable  from  this  customer
     amounted to $1,344,000 at September 30, 2003.


9.   Management's Liquidity Plans

     The Company's  management has and will continue to take numerous steps that
     it believes will create positive  operating cash flow for the Company.  Key
     measures are as follows:

--   In July 2003,  management  commenced a major cost  reduction plan involving
     among  other  things,  staff  reductions,  executive  pay rate  reductions,
     reduced  spending on non essential  expense items,  settle accounts payable
     with restricted Company common stock, as well as arrange wherever possible,
     deferred payment on some of its obligations.
--   Raise sufficient  capital through private  placements and or the incurrence
     of long term debt;
--   Actively pursue channel partner opportunities.  The Company recently became
     a business partner with IBM;
--   Continue to market its custom  engineering  fees. The Company  generated in
     excess of $2,500,000 in custom  engineering fees for the year 2002, and has
     generated  $1,779,000 in custom  engineering fees for the nine months ended
     September  30,  2003.  Management  believes  this revenue  should  continue
     throughout  2003 and into 2004.  This form of revenue has  generally led to
     recurring  revenue;
--   Increase revenue as a result of the agreement  entered into in 2002 between
     the Company and IBM, which allows IBM the ability to electronically  attach
     supporting  documentation to an electronic  invoice,  all submitted via the
     Internet to their customers;
--   Continue to develop new products and services;
--   Capitalize  on  the  growing  trend  for  outsource   services  within  the
     communications  sector. The acquisition of Platinum broadened the Company's
     product offerings in this market sector.

--   Lastly,  the  Company is  presently  in the  process of raising  additional
     capital of an amount it believes  will be  sufficient to meet it short term
     requirements.  To date the Company  has  received  commitments  aggregating
     $1,650,000  (of  which  $120,000  has  been  received)  primarily  from its
     Chairman/CEO and Metropolitan.

     Management  believes  that its plan will  ultimately  enable the Company to
     generate positive cash flows from operations.  Until such time, the Company
     believes that its short and long term plans as well as its ability to raise
     capital  through the issuance of additional  debt and/or  equity  financing
     should  provide  adequate  funding  through at least  September  30,  2004.
     However,  there can be no assurances  that the Company will have sufficient
     funds to implement its current plan. In such an event, the Company could be
     forced to  significantly  alter its plan and further  reduce its  operating
     expenses,  which  could have an adverse  effect on revenue  generation  and
     operations in the near term.

10.  Subsequent Events

     On April 16, 2003, the Company  received  notification  from Nasdaq that it
     did not comply with Marketplace Rule 4310(c)(2)(B),  to the extent that the
     Company did not have a minimum of $2,500,000 in  shareholders'  equity.  On
     May 1, 2003 the Company submitted a plan which specifically outlined how it
     believed it would  achieve and sustain  compliance  with this  requirement.
     Nasdaq  reviewed the plan submitted and determined  that the Company's plan
     did not adequately  address the issue. The Company appealed the decision to
     the Nasdaq Listing Qualification Panel (the "Panel"). On July 24, 2003, the
     Company  presented  its  business  case to the Panel  during  which time it
     requested  and was  granted  until  October  10,  2003 to  comply  with the
     original  requirement.  The Company has been engaged in certain  actions to
     substantially  increase  its  shareholder's  equity,  however,  it has been

                                       13
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

        FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

     unable  to  accomplish  this  objective  within  the  required   timeframe.
     Accordingly,  effective  October 24, 2003 the Company's common stock trades
     on the  Over-The-Counter  Bulletin Board  exchange,  maintaining its ticker
     symbol of "DIRI".

     In October 2003, the Company  obtained and fully drew on a $250,000 Line of
     Credit from Sterling National Bank. The Line of Credit is collateralized by
     various assets of the Company and is personally guaranteed by the Company's
     CEO and Chairman of the Board of  Directors.  The debt is repayable  over a
     period  of  thirty  six  months  and  accrues  finance  charges,  which are
     calculated  based on an annual  percentage  rate of 7% applied  against any
     outstanding balance.


     The  Company  extended  its  services  agreement  with its Chief  Executive
     Officer on December 5, 2003. The agreement now expires August 24, 2007. The
     extended  agreement calls for compensation of $15,000 per month and 360,000
     options, vesting 7,500 per month for the term of the agreement (48 months),
     to purchase the Company's  common stock at an exercise price of $1.16,  the
     closing price of the  Company's  common stock on the date the agreement was
     effective.  The agreement  provides for  reimbursement of reasonable out of
     pocket  business  expenses  and  further  provides  for  living  and travel
     expenses not to exceed $11,000 per month.


                                       14

<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES



Item 2 - Managements Discussion and Analysis or Plan of Operations

Forward looking statements

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

Overview

We primarily  operate as an application  service provider ("ASP") and, market an
integrated  "fee for  services"  offering  providing  high volume  processing of
transactional  data for billing purposes,  electronic  invoice  presentation and
payment  ("EIP&P") as well as visual data analysis and reporting tools delivered
via the Internet for our customers.  Our core  technology is  d.b.Express?,  the
proprietary and patented  management  information  tool, which provides targeted
access  through  the  mining  of large  volumes  of  transactional  data via the
Internet. In 2001 we acquired,  Platinum  Communications,  Inc. ("Platinum"),  a
Dallas,  Texas based  company,  which markets its  integrated  proprietary  back
office  software  solutions,  Account  Management  Systems  ("AMS" or  sometimes
referred to as "TAMS") to the telecommunications industry either as a license or
as an ASP. We completed a merger with  Platinum  under an Agreement  and Plan of
Merger ("Merger Agreement"). Under the Merger Agreement, our newly formed wholly
owned  subsidiary  acquired  all of the  outstanding  common  stock of Platinum.
Further,  as an added  source of  revenue,  we began in 2001 to  provide  custom
engineering  services for our  customers.  This suite of services  enables us to
provide a  comprehensive  Internet  delivered  service from the raw  transaction
record through all of the internal workflow  management  processes  including an
electronically  delivered invoice with customer  analytics.  This  comprehensive
service offering  provides back office  operations,  cuts costs and provides for
improved  customer service by providing the end customer with easy access to all
of the detailed  information  about their bill. We operate fully  redundant data
centers  located at our main office in Bohemia,  N.Y.  and in Newark,  N.J.  Our
facility  in New  Jersey is leased at an  IBM,e-business  Hosting  Center.  This
co-location / redundancy  feature  enables us to offer  virtually down time free
service.

Results of operations

IBM continues to be our largest customer accounting for 96% of total revenue for
the  three-month  period ended  September  30, 2003,  as compared to 88% for the
three-month period ended September 30, 2002. We derive revenue from IBM from the
sale of managed services (ASP) as well as custom engineering.  During the second
half  of  2001,  we  entered  into  an  agreement  with  IBM  wherein  for a per
transaction fee, we enable IBM to present invoices to a portion of its customers
via the  Internet.  This  EIP&P  offering  has since  been  expanded  to include
additional  functionality.  In March 2002,  the parties  signed a new agreement,
which allows IBM to expand this EIP&P  offering to more of its  customers,  both
domestic and international.  In addition,  the Company continues to provide data
analysis and reporting services for IBM's  telecommunications  customers. We are
actively pursuing new sales opportunities to reduce sales concentration.

                                       15
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

For the three months ended September 30, 2003, total revenue increased  $234,000
from  $1,851,000 for the three months ended September 30, 2002 to $2,085,000 for
the three months  ended  September  30, 2003.  An analysis of the increase is as
follows:  ASP revenue  increased  $282,000,  or 24%, to  $1,477,000 in 2003 from
$1,195,000 in 2002, and custom  engineering fees increased  $99,000,  or 22%, to
$557,000  in 2003  from  $458,000  in 2002.  These  increases  were  offset by a
decrease in AMS fees of $147,000.

Total revenue for the nine month period ended  September 30, 2003  aggregated to
$6,354,000.  When compared to  $5,348,000,  the total revenue  earned during the
same time  period  total in 2002,  the  Company  achieved an increase in overall
revenue of  $1,006,000  or 19%.  During the nine month time- frame,  ASP revenue
increased $1,021,000 to $4,149,000,  representing a 33% increase in revenue from
this service  compared to the nine month total in 2002 of  $3,128,000.  The most
significant  factor  contributing  to the  increase  in ASP revenue has been the
expansion  of the EIP&P  services.  As of  September  30,  2003 this  service is
offered in the U.S., Canada,  Brazil, and eight nations in Europe,  enabling our
customers to deliver their invoices in all local languages. The Company believes
that this service will continue to expand into  additional  countries in Europe,
Middle  East and into the  Pacific  Rim  within  the next  three to six  months.
Engineering  revenue  increased by $97,000,  or 6%, when comparing 2003 and 2002
amounts of $1,779,000 and $1,682,000, respectively. During the nine-month period
ended  September  30, 2003,  AMS revenue  decreased  $112,000 to $426,000,  when
compared to $538,000 in the 2002 period.

Operations,  research and development expenses consist primarily of salaries and
related  costs  (benefits,  travel and training)  for  developers,  programmers,
custom  engineers,  network  services,  quality control / quality  assurance and
documentation personnel, applicable overhead allocations, as well as co-location
facilities expenses and all costs directly associated with the production and or
development of the Company's services.

     --   When  comparing  the three months ended  September  30, 2003 and 2002,
          operations,  research and development  expenses remained virtually the
          same, increasing by $2,000. The Company continues to upgrade,  improve
          and enhance its current  products and services,  while  maintaining an
          approach to cost effectiveness.

     --   When comparing the nine months ended  September 30, 2003 and 2002, the
          Company increased its operations, research and development expenses by
          $421,000 or 42% of incremental revenue growth of $1,006,000.  The most
          significant item contributing to this increase was additional staffing
          costs and professional fees totaling $412,000.  Additional operations,
          research and development  expenses  incurred  associated with Platinum
          amounted  to  $17,000.   All  other  expenses   decreased  by  $8,000.
          Management  believes  that it is  critical  to  maintain  a  qualified
          personnel  staff  and,  further,  to  continue  to  enhance as well as
          develop new and innovative services and products.  It is expected that
          operations,  research and  development  costs will  increase in future
          periods as a result of anticipated increases in future revenue as well
          as  costs   associated  with  its   product/service   enhancement  and
          development activities.

Sales and marketing  expenses include  salaries and related costs,  commissions,
travel,  facilities,  communications  costs  and  promotional  expenses  for the
Company's direct sales organization and marketing staff.

     --   Sales and  marketing  expenses  increased  $33,000 to $676,000 for the
          three months ended  September 30, 2003,  when compared to $643,000 for
          the three months ended  September 30, 2002.  Wages and consulting fees
          increased  $71,000  and  costs  associated  with  Platinum   increased
          $81,000.  However,  rent and travel  expenses  decreased  $46,000  and
          $34,000,  respectively.  All other  items in the  aggregate  decreased
          $39,000.

     --   Sales and marketing  expenses increased $462,000 to $2,255,000 for the
          nine months ended  September 30, 2003 when compared to $1,793,000  for
          the nine months  ended  September  30,  2002.  Costs  associated  with
          Platinum increased expenses by $298,000. Further, wages and consulting

                                       16
<PAGE>

          fees  increased  $246,000.  Offsetting  these  increases were rent and
          travel expenses which decreased $17,000 and $63,000, respectively.

General  and  administrative   expenses  include  administrative  and  executive
salaries and related benefits,  legal, accounting and other professional fees as
well as general corporate overhead.

     --   Expenses  decreased  $146,000  to  $841,000  for  three  months  ended
          September 30, 2003,  when compared to $987,000  reported for the three
          months ended  September 30, 2002.  Major factors  contributing to this
          decrease  include  reductions in general and  administrative  expenses
          related to  Platinum  of $40,000,  expenses  related to the  Company's
          Board of  Directors  of $35,000,  as well as a  reduction  in expenses
          related to salaries  and benefits  totaling  $47,000.

     --   Expenses  decreased  $284,000 to $2,645,000  for the nine months ended
          September  30, 2003 when  compared to the nine months ended  September
          30, 2002. Major factors  contributing to this decrease include,  among
          other things, a decrease in professional  fees and business  insurance
          of $210,000  and  $21,000,  respectively,  general and  administrative
          expenses  related to  Platinum  of  $29,000,  expenses  related to the
          Company's  Board of  Directors  of $62,000,  as well as a reduction in
          expenses related to salaries and benefits totaling $7,000.  Offsetting
          these  reductions  were  increases in auto  expense of $34,000.  Other
          expenses showed a net increase of $11,000.

Amortization  and  depreciation  expenses  increased $7,000 for the three months
ended  September 30, 2003 when compared to the three months ended  September 30,
2002 and  decreased  $39,000 for the nine months ended  September  30, 2003 when
compared to the nine months ended September 30, 2002.

Financial Condition and Liquidity

For the nine months ended September 30, 2003, the Company incurred net operating
losses thereby requiring cash from sources other than normal operations to fund
its operating activities. In order to fund its operating losses, the Company:

--   in January 2003,  received an unsecured  $500,000 loan from Tall Oaks.  See
     Note 5;
--   as  described  in Note 6, in  December  2002,  sold  23,365  shares  of its
     Preferred  Stock in  consideration  for $500,000  less fees and expenses of
     $61,000, to Metropolitan.  The proceeds from this transaction were received
     January 3, 2003;
--   as described in Note 6, in June 2003,  sold 17,857  shares of its Preferred
     Stock in consideration  for $250,000,  less fees and expenses of $5,000, to
     Metropolitan;
--   as further  described in Note 6, reduced future cash outflows by exchanging
     $974,000 of Company  obligations for 974 shares of its Series A-1 Preferred
     stock;
--   continues  to make use of its  financing  arrangement  with an asset  based
     lending institution;
--   as  described in Note 5, in July 2003,  the Company drew the full  $500,000
     amount  of a line of credit  obtained  from JP Morgan  Private  Bank;
--   in October  2003,  the  Company  obtained a  $250,000  line of credit  from
     Sterling National Bank. See Note 10.

As detailed in the Condensed  Consolidated  Statement of Cash Flows,  during the
nine month period ended September 30, 2003, the Company  utilized  $1,929,000 in
operating  activities,  which  includes,  among  other  items,  a  net  loss  of
$3,151,000,  an increase in accounts  receivable of $117,000,  and a decrease in
deferred  revenue of $60,000,  partially  offset by non-cash  expenses  totaling
$949,000, an increase in accounts payable and accrued expenses of $338,000 and a
decrease in prepaid  expenses  and other  current  assets of  $40,000.  Further,
during  the  nine  months  ended  September  30,  2003,  the  Company   expended
approximately $309,000 for capital expenditures.

In order to address the Company's  cash  requirements,  management  has and will
continue to take numerous steps that it believes will create positive  operating
cash flow. Key measures are as follows:

     --   In July  2003,  management  commenced  a  major  cost  reduction  plan
          involving  among other things,  staff  reductions,  executive pay rate
          reductions,  reduced spending on non essential  expense items,  settle
          accounts  payable with  restricted  Company  common stock,  as well as
          arrange   wherever   possible,   deferred   payment  on  some  of  its
          obligations.

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                      DIRECT INSITE CORP. AND SUBSIDIARIES

     --   Raise capital through private placements and or the incurrence of long
          term debt;
     --   Actively pursue channel partner  opportunities.  The Company  recently
          became a business partner with IBM;
     --   Continue to market its custom  engineering fees. The Company generated
          in excess of $2,500,000 in custom  engineering fees for the year 2002,
          and has generated  $1,779,000 in custom  engineering fees for the nine
          months ended  September  30, 2003.  Management  believes  this revenue
          should  continue  throughout  2003 and into 2004. This form of revenue
          has generally led to recurring revenue;
     --   Increase  revenue as a result of the  agreement  entered  into in 2002
          between  the  Company  and  IBM,  which  allows  IBM  the  ability  to
          electronically  attach  supporting   documentation  to  an  electronic
          invoice, all submitted via the Internet to their customers;
     --   Continue to develop new products and  services;
     --   Capitalize  on the growing  trend for  outsource  services  within the
          communications  sector.  The  acquisition  of Platinum  broadened  the
          Company's product offerings in this market sector;
     --   Lastly,  the Company is presently in the process of raising additional
          capital of an amount it believes  will be  sufficient to meet it short
          term  requirements.  To date  the  Company  has  received  commitments
          aggregating $1,650,000 (of which $120,000 has been received) primarily
          from its Chairman/CEO and Metropolitan.

     Management  believes  that its plan will  ultimately  enable the Company to
     generate positive cash flows from operations.  Until such time, the Company
     believes that its short and long term plans as well as its ability to raise
     capital  through the issuance of additional  debt and/or  equity  financing
     should  provide  adequate  funding  through at least  September  30,  2004.
     However,  there can be no assurances  that the Company will have sufficient
     funds to implement its current plan. In such an event, the Company could be
     forced to  significantly  alter its plan and further  reduce its  operating
     expenses,  which  could have an adverse  effect on revenue  generation  and
     operations in the near term.

Item 3 - Controls and Procedures

Our chief  executive  officer and chief  financial  officer have  supervised and
participated in an evaluation of the  effectiveness  of our disclosure  controls
and  procedures  as of a date  within 90 days of the date of this  report,  and,
based on their  evaluations,  they  believe  that our  disclosure  controls  and
procedures (as defined in Rule 13a-14(c) of the Securities Exchange Act of 1934,
as amended) are designed to ensure that information  required to be disclosed by
us in the reports  that we file or submit under the  Securities  Exchange Act of
1934 is recorded,  processed,  summarized and reported,  within the time periods
specified in the  Commission's  rules and forms.  As a result of the evaluation,
there were no significant  changes in our internal  controls or in other factors
that could  significantly  affect these controls subsequent to the date of their
evaluation.

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                      DIRECT INSITE CORP. AND SUBSIDIARIES

                          PART II - OTHER INFORMATION

Item 1. Legal Proceedings
        None

Item 2. Changes in Securities
        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 and Reports on Form 8-K.
        (a)  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.


        (b)  Reports on Form 8-K

             Current Report on Form 8-K dated August 21, 2003.

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                      DIRECT INSITE CORP. AND SUBSIDIARIES

                                   SIGNATURES



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




DIRECT INSITE CORP.



/s/ James Cannavino                                 12/9/03
----------------------------------------        ----------------
James Cannavino, Chief Executive Officer        December 9, 2003


/s/ George Aronson                                  12/9/03
----------------------------------------        ----------------
George Aronson, Chief Financial Officer         December 9, 2003

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