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, 2004

                                       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 October  31,
2004 was: 4,355,684.

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

<TABLE>
<CAPTION>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

                                     INDEX


PART I - FINANCIAL INFORMATION                                                                                 Page
<S>  <C>                                                                                                         <C>

       Item 1

     Condensed Consolidated Balance Sheets as of September 30, 2004 (Unaudited) and
       December 31, 2003 .................................................................................        3

     Condensed Consolidated Statements of Operations
       For the Three and Nine Months Ended September 30, 2004 and 2003 (Unaudited)........................        4

     Condensed Consolidated Statements of Cash Flows
       For the Nine Months Ended September 30, 2004 and 2003 (Unaudited)..................................        5

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

     Item 2

     Management's Discussion and Analysis or Plan of Operations ..........................................       14

     Item 3

     Controls and Procedures..............................................................................       18

PART II - OTHER INFORMATION

     Item 1. Legal Proceedings ...........................................................................       18

     Item 2. Unregistered Sales of Equity Securities and Use of Proceeds .................................       18

     Item 3. Defaults Upon Senior Securities .............................................................       18

     Item 4.  Submission of Matters to a Vote of Security Holders ........................................       18

     Item 5. Other Information ...........................................................................       18

     Item 6. Exhibits ....................................................................................       18

     Signatures ..........................................................................................       19


CERTIFICATIONS ...........................................................................................       20
</TABLE>
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                 AS OF SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
                       (In thousands, except share data)

<TABLE>
<CAPTION>

                                                                                  September 30,         December 31,
                                                                                      2004                 2003
                                                                              --------------------- --------------------
<S>                                                                           <C>                   <C>

                                                                                  (Unaudited)            (Audited)
ASSETS
Current assets
  Cash and cash equivalents                                                   $             140     $             75
  Accounts receivable, net of allowance for doubtful accounts of
   $2 in 2004 and 2003                                                                    1,142                 1,068
  Prepaid expenses and other current assets                                                 184                   215
  Assets from discontinued operations                                                         -                    47
                                                                              -----------------     -----------------
       Total current assets                                                               1,466                 1,405

Property and equipment, net                                                                 674                   771
Other assets                                                                                319                   335
                                                                              -----------------     -----------------
         TOTAL ASSETS                                                         $           2,459     $           2,511
                                                                              =================     =================
LIABILITIES AND SHAREHOLDERS' DEFICIENCY

Current liabilities
  Accounts payable and accrued expenses                                        $          1,904     $           2,248
  Short term revolving loans                                                                715                   585
  Deferred revenue                                                                            -                    96
  Current portion of long-term debt                                                         797                   880
  Liabilities from discontinued operations, current portion                                 153                   581
                                                                              -----------------     -----------------
       Total current liabilities                                                          3,569                 4,390

Long term debt, net of current portion                                                      153                    42
Dividends payable                                                                           841                   382
Liabilities from discontinued operations, long-term                                           -                    87
                                                                              -----------------     -----------------
       Total liabilities                                                                  4,563                 4,901
                                                                              -----------------     -----------------
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 2004 and 2003; liquidation preference of $2,750,000 in 2004 and
     2003                                                                                      -                     -
     Series B Redeemable Preferred, 974 issued and outstanding in
     2004                                                                                      -                     -
     and 2003; liquidation preference of $974,075 in 2004 and 2003
     Series C Redeemable Preferred, 2,000 and 590 issued and outstanding
    in 2004 and 2003, respectively; liquidation preference of
    $2,000,000 and $590,000, in 2004 and 2003, respectively
    Common stock, $0.0001 par value; 150,000,000
     shares authorized in 2004 and 2003;
     4,395,611 and 4,080,402 shares issued in 2004 and 2003,
     respectively; and 4,355,684 and 4,040,475 shares outstanding
     in 2004 and 2003, respectively                                                           -                     -
  Additional paid-in capital                                                            112,253               110,582
  Accumulated deficit                                                                  (114,029)             (112,644)
                                                                              -----------------     -----------------
                                                                                         (1,776}               (2,062)

  Common stock in treasury, at cost - 24,371 shares                                        (328)                 (328)
                                                                              -----------------     -----------------
       Total shareholders' deficiency                                                    (2,104)               (2,390)
                                                                              -----------------     -----------------
          TOTAL LIABILITIES AND SHAREHODERS' DEFICIENCY                       $           2,459    $            2,511
                                                                              =================     =================

</TABLE>
See notes to condensed consolidated financial statements.

                                       3
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

        FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
                     (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                               Three Months Ended              Nine Months Ended
                                                                  September 30,                  September 30,
                                                               2004           2003            2004           2003
                                                          --------------- -------------- --------------- --------------
<S>                                                       <C>             <C>            <C>             <C>

   Revenue                                                $        1,598  $       2,034  $       5,421   $       5,928
                                                          --------------  -------------  -------------   -------------
   Costs and expenses
     Operations, research and development                            868          1,055          2,632           3,256
     Sales and marketing                                             386            507          1,201           1,657
     General and administrative                                      694            821          2,098           2,531
     Amortization and depreciation                                   131            173            415             520
                                                          --------------  -------------  -------------   -------------
                                                                  2,079           2,556          6,346           7,964
                                                          --------------  -------------  -------------   -------------
   Operating loss                                                  (481)           (522)          (925)         (2,036)

   Other expenses
     Interest expense, net                                         (77)            (68)          (223)           (219)
     Other expense                                                 ----            (25)           (33)            (66)
                                                          --------------  -------------  -------------   -------------
   Loss before provision for income taxes                          (558)           (615)        (1,181)         (2,321)

   (Provision for) benefit from income taxes                         (1)            109             (5)            109
                                                          --------------  -------------  -------------   -------------
   Loss from continuing operations                                 (559)           (506)        (1,186)         (2,212)

   (Loss) income from discontinued operations                        (2)           (322)           260            (939)
                                                          --------------  -------------  -------------   -------------
   Net loss                                                         (561)          (828)          (926)         (3,151)

   Preferred stock dividends                                        (161)          (102)          (459)          (231)
                                                          --------------  -------------  -------------   -------------
   Net loss attributable to
        common shareholders                               $         (722) $        (930) $      (1,385)  $      (3,382)
                                                          ==============  =============  =============   =============
   Basic and diluted loss per share:
     Basic and diluted loss from continuing operations    $        (0.17)  $      (0.15) $       (0.39)  $       (0.61)
     Basic and diluted income (loss) from discontinued
     operations                                                    --             (0.08)          0.06           (0.24)
                                                          --------------  -------------  -------------   -------------
   Basic and diluted loss  per share                      $       (0.17)  $       (0.23) $       (0.33)  $       (0.85)
                                                          =============   =============  =============   =============
   Basic and  diluted  weighted  average  common  shares
   outstanding                                                    4,356           4,029          4,243           3.979
                                                          =============   =============  =============   =============
</TABLE>
See notes to condensed consolidated financial statements.

                                       4
<PAGE>

                      DIRECT INSITE CORP. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                       (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                          For the nine months ended
                                                                                                 September 30,
                                                                                            2004              2003
                                                                                     ----------------- ------------------
<S>                                                                                    <C>                <C>
Cash flows from operating activities
 Loss from continuing operations                                                       $      (1,186)     $     (2,212)
 Adjustments to reconcile loss from continuing operations
  to net cash used in continuing operations:
   Amortization and depreciation:
     Property and equipment                                                                      413               518
     Other                                                                                         2                 2
    Provision for doubtful accounts                                                               --                88
    Common stock and options issued for services                                                   4               175
    Other                                                                                         --                25

  Changes in operating assets and liabilities:
    Accounts receivable                                                                          (74)             (326)
    Prepaid expenses and other current assets                                                     31                40
    Other assets                                                                                  14                75
    Accounts payable and accrued expenses                                                        (87)              468
    Deferred revenue                                                                             (96)               12
                                                                                       --------------    -------------
       Net cash used in continuing operations                                                   (979)           (1,135)
                                                                                       --------------    -------------
  Income (loss) from discontinued operations                                                     260              (939)
  Change in:
    Assets and liabilities from discontinued operations                                         (468)              181
                                                                                       --------------    -------------
       Net cash used in discontinued operations                                                 (208)             (758)
                                                                                       --------------    -------------
       Net cash used in operating activities                                                  (1,187)           (1,893)
                                                                                       --------------    -------------
Cash flows used in investing activities
 Expenditures for property and equipment                                                         (90)             (309)
                                                                                       --------------    -------------
       Net cash used in investing activities                                                     (90)             (309)
                                                                                       --------------    -------------
Cash flows from financing activities
 Proceeds from common stock subscription receivable                                               --                21
 Proceeds from sales of preferred stock                                                        1,410               750
 Costs related to the sale of preferred stock                                                     --               (23)
 Proceeds from revolving loans, net                                                              130               108
 Proceeds from long-term debt, net of fees                                                        --               496
 Proceeds from line of credit                                                                     --               500
 Repayments of long-term debt                                                                   (198)             (201)
                                                                                       --------------    -------------
          Net cash provided by financing activities                                            1,342             1,651
                                                                                       --------------    -------------
Net increase (decrease) in cash and cash equivalents                                              65              (551)

Cash and cash equivalents - beginning of period                                                   75               620
                                                                                       --------------    -------------
Cash and cash equivalents - end of period                                              $         140     $          69
                                                                                       ==============    =============
Non-cash investing and financing activities:

Issuance of 310,209 common shares in 2004
for services and fees incurred in 2003 (Note 6)                                           $      257
                                                                                          ==========
Fixed assets acquired in exchange for capital lease obligation                            $      226
                                                                                          ==========
</TABLE>
See notes to condensed consolidated financial statements.

                                       5
<PAGE>


                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003


1.   Interim Financial Information

     The condensed  consolidated balance sheet as of September 30, 2004, and the
     condensed  consolidated  statements  of  operations  and cash flows for the
     three and nine months ended September 30, 2004 and 2003, have been prepared
     by the Company and are not  audited.  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  periods ended September
     30, 2004,  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, 2003 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 December 31, 2003 consolidated financial statements.


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
     processes  high  volumes  of  transactional  data for  invoice  presentment
     purposes delivered via the Internet on a global basis.

     The Company also provides  additional  service offerings in the form of its
     patented dbExpress TM technology, a management information tool that allows
     users to visually  data mine large  volumes of  transactional  data via the
     Internet.  A complete  Internet  Customer Care tool set integrated with the
     EIP&P product set is also available.  The Company  operates fully redundant
     data  centers  located at its main  office in Bohemia,  N.Y.  and in an IBM
     co-location facility in Newark, NJ.

     Management's liquidity plans are discussed in Note 9. Also, as described in
     Note 8, the Company has one major customer that accounted for approximately
     96% of the Company's  revenue for the nine months ended September 30, 2004.
     Loss of this customer would have a material adverse effect on the Company.

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

     As   permitted   under   SFAS  No.   148,   "Accounting   for   Stock-Based
     CompensationTransition  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):

                                       6
<PAGE>

                      DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

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

                                                                        2004          2003           2004         2003
                                                                   ------------ -------------- ------------- -----------
      <S>                                                              <C>            <C>        <C>            <C>
      Net loss attributable to common shareholders
      As reported                                                      $   (722)      $ (930)    $   (1,385)    $ (3,382)
      Less:  Stock-based employee compensation
       expense determined under fair value-based
       method for all awards                                                (48)        (278)          (493)        (859)
                                                                       --------      -------      ----------    --------
      Pro forma                                                        $   (770)     $(1,208)     $  (1,878)    $ (4,241)
                                                                       ========      =======      =========     ========
     Basic and diluted net loss per share
      As reported                                                      $  (0.17)     $ (0.23)     $   (0.33)    $  (0.85)
                                                                       ========      =======      =========     ========
      Pro forma                                                        $  (0.18)     $ (0.30)     $   (0.44)    $  (1.07)
                                                                       ========      =======      =========     ========
</TABLE>

     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 68.1%
     to 69.5% in 2004 and  ranging  from 63.4% to 71.5% in 2003,  (2) risk- free
     interest  rates of 4.00% in 2004 and 4.25% in 2003 and (3)  expected  lives
     ranging from 4.8 to 5.25 years in 2004 and 2.00 to 5.2 years in 2003.


3.   Discontinued Operations

     Platinum Communications, Inc.
     -----------------------------

     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
     results of  operations  and the  assets and  liabilities  of  Platinum  are
     presented as discontinued operations for both the current and prior period.
     The income and losses are  reflected  as income  (loss)  from  discontinued
     operations  in  the  accompanying  condensed  consolidated   statements  of
     operations.  The following  table reflects the results of the  discontinued
     operations  of Platinum for the three and nine months ended  September  30,
     2004 and 2003, respectively (in thousands):
<TABLE>
<CAPTION>
                                                        Three Months Ended              Nine Months Ended
                                                           September 30                    September 30
                                                       2004             2003            2004             2003
                                                     ----------      ---------       ----------     ----------
         <S>                                         <C>             <C>             <C>            <C>

         Revenue                                     $        0       $      51       $       0      $     426
                                                     ----------      ---------       ----------     ----------
          Costs and Expenses
          Operations, research and
          development                                        --           (135)              --           (500)
          Sales and marketing                                --           (169)              --           (598)
          General and administrative                         --            (20)              --           (115)
           Amortization and depreciation                     --            (47)              --           (141)
           Other income  - net                               --             --              267              1
           Interest expense, net                             (2)            (2)              (7)           (12)
                                                     ----------      ---------       ----------     ----------
                 Total other (expenses) and
                 income                                      (2)          (373)             260         (1,365)
                                                     ----------      ---------       ----------     ----------
                 (Loss) income from
                 discontinued operations             $       (2)     $    (322)      $      260     $     (939)
                                                     ==========      =========       ==========     ===========
</TABLE>

                                       7
<PAGE>
                     DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003


     At September  30,  2004,  the  discontinued  operation  had no  significant
     assets.  The liabilities of the discontinued  operation include the balance
     of loans totaling $78,000,  and accounts payable and accrued liabilities of
     $75,000.


4.   Accounts Receivable and Short Term 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 % 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 September 30, 2004,  the Company had assigned  approximately
     $606,000  of  accounts  receivable  to the Bank and  received  advances  of
     $485,000.

     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 Director of the
     Company,  are the principal investors in the Rec Fund. Under the Agreement,
     the Company  pays  interest at the rate of one (1) percent per month on the
     maximum  purchase  amount (as defined in the agreement) of the Rec Fund and
     pays the administrative costs of the Rec Fund which approximate $12,000 per
     year.  At September 30, 2004 the Rec Fund had a total  principal  available
     for  assignment of $250,000 and the Company had  outstanding  advances from
     the Rec Fund of $230,000  resulting  in an unused  availability  of $20,000
     under the agreement.

5.   Long Term Debt

       long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>

                                                       September 30,    December 31,
                                                          2004              2003
                                                     ---------------- ---------------
       <S>                                             <C>                 <C>
       Lines of credit (a)                             $       684         $     736
       Capitalized lease obligations (b)                       266               186
                                                       -----------         ---------
                                                               950               922
       Less current portion                                   (797)             (880)
                                                       -----------         ---------
       Long-term debt, net of current portion          $       153         $      42
                                                       ===========         =========
</TABLE>
     (a)  In 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  on the

                                       8
<PAGE>
                     DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003


          earlier of demand or June 30,  2005.  The LoC  permitted  two forms of
          draw down; one based upon prime rate, the second based upon LIBOR.  In
          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%.  As of  September  30,  2004,  the balance
          outstanding is $500,000 and the applied interest rate was 4.79%.

          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. The line is guaranteed by the Company's chairman, secured by
          the  assets  of the  Company,  and  carries  an  interest  rate of 7%.
          Repayments  are  calculated  monthly  at  2.778%  of  the  outstanding
          balance,  plus finance  charges,  and continue until the line is fully
          paid. At September 30, 2004, the Company had an outstanding balance of
          approximately $184,000 under the line of credit.

     (b)  The Company has equipment under capital lease obligations  expiring at
          various times through 2007. 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.


6.   Shareholders' Deficiency

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

     In December 2003, the Company's  Board of Directors  authorized the sale of
     up to 1,500 shares of its non-voting  Series C Redeemable  Preferred  Stock
     ("Preferred  Stock - C") and in April 2004 the Board authorized the sale of
     an additional 500 shares. During December 2003, the Company sold 590 shares
     of the  Preferred  Stock - C in  consideration  for $590,000  less fees and
     expenses   of  $60,000  to   Metropolitan   Venture   Partners   II,   L.P.
     ("Metropolitan")  and certain board members and an executive officer of the
     Company. Metropolitan was issued 200,000 warrants with an exercise price of
     $2.125 to purchase  common stock of the Company for services in  connection
     with the  transaction.  The holders of Preferred  Stock - C are entitled to
     dividends  at the  rate of 9-% per  annum,  payable  quarterly  in  arrears
     beginning  October 1, 2005.  The  Company  has the option to redeem  issued
     shares of Preferred  Stock - C, in whole or in part, at any time,  with the
     redemption  price  equal to the  purchase  price  plus  accrued  and unpaid
     dividends.  For each share of Preferred Stock - C purchased,  each investor
     received a Warrant to purchase the number of shares of the Company's common
     stock equal to the Price Per Share divided by 123% of the closing price per
     share of the Company's common stock on the trading day immediately prior to
     the date of issuance of the  Warrant.  During the six months ended June 30,
     2004  the  Company  sold  an  additional   1,410  shares  for  proceeds  of
     $1,410,000,  and issued 1,159,629 warrants in connection with the issuance.
     As of September 30, 2004,  approximately  $111,000 in dividends are accrued
     for the Preferred  Stock - C holders.  As of September 30, 2004,  1,990,779
     warrants are  outstanding  in  connection  with the  issuances of Preferred
     Stock C. The  warrants  expire  in 2008 and 2009 and have  exercise  prices
     ranging from $0.86 to $2.13 per common  share.  The proceeds  were used for
     working capital purposes.


     Between  September  2002 and June 2003, the Company sold a total of 134,680
     shares of Series A Convertible  Preferred Stock, ("Series A Preferred ") in
     consideration  for the gross amount of $2,750,000 to  Metropolitan  Venture
     Partners II, L.P. The holders of the Series A Preferred ("the Holders") are
     entitled to dividends, on a cumulative basis, at the rate of 9-% per annum,
     compounded  quarterly  and payable on February  1, 2005 and  September  25,
     2005.  The  payment of the first  dividend  was  originally  scheduled  for
     September 25, 2004,  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.  In May 2004 the  Company  and the  Holders  further
     agreed to grant the Company the right, in its sole discretion, to defer the
     payment of the  dividend  scheduled  to be paid on  February  1, 2005 until

                                       9
<PAGE>
                     DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

     February 1, 2006.  In the event the Company  elects to pay the  dividend on
     February 1, 2006 the Holders  would  receive a premium of $157,000.  In the
     event the Company  does not elect to defer the payment of the  dividend the
     Company  agreed to pay the Holders a premium of $35,000.  Also, the Company
     and the Holders  further agreed to grant the Company the right, in its sole
     discretion,  to defer the payment of the  dividend  scheduled to be paid on
     September 25, 2005 until  February 1, 2006. In the event the Company elects
     to pay this  dividend  on  February  1, 2006 the  Holders  would  receive a
     premium of $17,000.  In the event the  Company  does not elect to defer the
     payment of the dividend the Company  agreed to pay the Holders a premium of
     $8,000.  At September 30, 2004 there were $607,000 of dividends accrued and
     unpaid for Series A Preferred Holders.

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

     During the nine months ended September 30, 2004, the Company issued 315,209
     unregistered  shares of common stock and options to purchase 250,000 shares
     of its common stock as follows:

     --   15,000  shares  of  common  stock  valued at  $12,000  pursuant  to an
          employment  agreement with the Company's  Chief  Executive  Officer as
          follows:  5,000  shares  valued at $4,000 for services for the quarter
          ended March 31, 2004,  and 10,000 shares valued at $8,000 for services
          rendered and costs recorded in the year 2003.

     --   82,509  shares valued at $75,000 to directors for service on the Board
          of Directors and  Committees of the Board for the year 2003, the costs
          were recorded in 2003;

     --   35,000  shares  valued at $26,000 to an employee for services in 2003,
          the costs were recorded in 2003;

     --   182,700 shares valued at $148,000 to consultants for services rendered
          in 2003, the costs were recorded in 2003.

     --   50,000  options to purchase  shares of common stock to a new member of
          the Board of  Directors.  The options vest ratably from  February 2004
          through February 2007 and have an exercise price of $0.77 per share.

     --   170,000  options  to  purchase  shares  of  common  stock  to  certain
          employees of the  Company.  The options vest ratably over a three-year
          period on an semi-annual basis beginning December 31, 2004 and have an
          exercise price of $1.75 per share.

     --   30,000  options to  purchase  shares of common  stock to an  executive
          officer of the Company.  The options vest in stages  through  December
          31, 2006 and have an exercise price of $1.60 per share.

     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

                                       10
<PAGE>
                     DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

     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                                      4,581
     Convertible preferred stock and warrants to acquire common stock      3,338
                                                                           -----
          Total potential common shares as of September 30, 2004           7,919
                                                                           =====
</TABLE>
     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.  These  reclassifications have no
     effect on previously reported net income or loss.


     8.   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                Nine Months Ended
                                                              September 30,                     September 30,
                                                         2004               2003              2004           2003
                                                      ------------       ----------        ---------      ---------
               <S>                                       <C>                 <C>             <C>            <C>
               ASP fees                                  $1,140              $1,477          $3,397         $4,149
               Custom engineering fees                      458                 557           2,024          1,779
                                                         ------              ------          ------         ------
                    Total Revenue                        $1,598              $2,034          $5,421         $5,928
                                                         ======              ======          ======         ======
</TABLE>
     Major Customer
     --------------

     For the three and nine months ended September 30, 2004, the Company had one
     major  customer that  accounted for 90.9% and 95.7% of the Company's  total
     revenue,  respectively.  For the three and nine month periods in 2003, this
     customer  accounted  for 98.7% and  96.6% of total  revenue,  respectively.
     Accounts receivable from this customer amounted to approximately $1,078,000
     at September 30, 2004.

                                       11
<PAGE>
                     DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

9.   Management's Liquidity Plans

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

     --   In the second  half of 2003 the Company  embarked on a cost  reduction
          program,  including  among other things,  staff  reductions,  pay rate
          reductions, and elimination of non-essential expenses. As demonstrated
          by the  improved  operating  performance  in the first nine  months of
          2004, the Company  believes these cost reductions have begun to have a
          positive impact on its operating  performance.  The Company notes that
          its  intention  is to  reinstate  the pay rate  reductions  as soon as
          practical and as soon as its operating results and cash flows permit.

     --   As  discussed  in Note 3, in  December  2003 the  Company  closed  the
          Dallas,  Texas based operations of Platinum.  Platinum had experienced
          losses and had  significant  cash needs.  In 2003,  Platinum  utilized
          $1,012,000 of cash.  During the nine months ended  September 30, 2004,
          the discontinued operations of Platinum used $208,000 of cash.

     --   The Company intends to raise additional capital through private equity
          offerings and borrowing. In this regard in December 2003, as discussed
          in Note 6, the Company  initiated the sale of Series C Preferred stock
          and as of  September  30,  2004 had net  proceeds  from these sales of
          $1,940,000. Also as discussed in Note 10 the Company has initiated the
          sale of Series D  Preferred  stock and Senior  Notes and as of October
          30, 2004 has received proceeds from such sale of $100,000.

     --   The Company  continues to strive to increase  revenue through offering
          custom  engineering  services,  expanding  and  enhancing its existing
          product offerings,  and introducing new product offerings. In 2003 the
          Company's  revenue  increased  $827,000 or 12.5% over revenue in 2002.
          For the first nine  months of 2004 our revenue  decreased  by $507,000
          compared to the same  period in 2003,  however,  the Company  believes
          revenue  for the year  ending  December  31,  2004  will  exceed  2003
          revenue.

     --   The  Company  continues  to expand its  marketing  efforts in order to
          increase  its customer  base.  In this  regard,  in 2003,  the Company
          became a business partner with IBM and through this  relationship will
          work with IBM in an  effort to  achieve  sales to new  customers.  The
          Company will continue to pursue similar channel partner opportunities.
          In addition, in June 2004 the Company signed a contract to provide ASP
          services  with a new customer  that the Company  believes will produce
          significant revenue in 2004 and beyond.

     The Company  believes that the plan and  initiatives  discussed  above will
     ultimately lead to positive cash flows and profitability. While the Company
     pursues  these goals the Company  also  believes  that the ability to raise
     additional   capital  through  equity  and  debt  placements  will  provide
     sufficient  cash to meet our  requirements  at least through  September 30,
     2005. There can be no assurance, however, that the Company will achieve its
     cash flow and  profitability  goals,  or that the  Company  will be able to
     raise additional capital sufficient to meet operating expenses or implement
     the plan.  In such  event,  the  Company  may have to revise  the plans and
     significantly reduce operating expenses, which could have an adverse effect
     on revenue and operations in the short term.

     10.  Subsequent Events

     In 2004 the Board of  Directors of the Company  authorized  the issuance of
     securities to obtain additional financing up to $1,500,000. In October 2004
     the  Company  initiated  the sale of Series D  Redeemable  Preferred  Stock


                                       12
<PAGE>
                     DIRECT INSITE CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
                                  (Unaudited)

             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

     and/or  Senior  Notes.  The total of the two  securities  are not to exceed
     $1,500,000.  The  holders of the Series D  Preferred  ("the  Holders")  are
     entitled to dividends, on a cumulative basis, at the rate of 9-% per annum,
     compounded  quarterly and payable on January 1, April 1, July 1 and October
     1,  beginning  April 1, 2006.  For each share of Series D  Preferred  Stock
     purchased,  each  investor will receive a Warrant to purchase the number of
     shares  of the  Company's  common  stock  equal  to  the  Price  Per  Share
     multiplied by 150%,  then divided by 123% of the closing price per share of
     the Company's common stock on the trading day immediately prior to the date
     of issuance of the  Warrant.  The Series D  Preferred  have a  preferential
     right to dividends and to distribution in the event of liquidation, however
     the Series D rank  junior to the  Series A, B and C  Preferred  Stock.  The
     Company may elect to redeem shares of Series D Preferred Stock, in whole or
     in part, at any time and from time to time out of funds  legally  available
     therefore.  Upon redemption of any shares of Series D Preferred  Stock, the
     participating  Holders  thereof  shall  receive  an  amount  equal  to  the
     Redemption Price of $1,000 plus accrued and unpaid dividends for each share
     of outstanding Series D Preferred Stock so redeemed.

     As of  October  31,  2004 the  Company  had sold 100 shares of the Series D
     Preferred and received proceeds of $100,000.  The proceeds will be used for
     working capital purposes.

     11.  New Accounting Pronouncements

     In January  2003 and amended in December  2003,  the  Financial  Accounting
     Standards Board ("FASB") issued  Interpretation  No. 46,  "Consolidation of
     Variable  Interest  Entities" ("FIN 46"), an  interpretation  of Accounting
     Research  Bulletin  No. 51. FIN 46 expands  upon and  strengthens  existing
     accounting  guidance that  addresses  when a company  should include in its
     financial  statements  the assets,  liabilities  and  activities of another
     entity. A variable interest entity is any legal structure used for business
     purposes that either does not have equity  investors  with voting rights or
     has equity investors that do not provide sufficient financial resources for
     the entity to support its activities.  FIN 46 requires a variable  interest
     entity to be  consolidated  by a company  if that  company  is subject to a
     majority of the risk of loss from the variable interest entity's activities
     or entitled to receive a majority of the entity's residual returns or both.
     The  consolidation  requirements  of FIN 46 apply  immediately  to variable
     interest  entities  created  after  January  31,  2003.  The  consolidation
     requirements  apply to older  entities in the first  fiscal year or interim
     period  beginning  after June 15, 2003.  However,  in December  2003,  FASB
     deferred  the  latest  date by which all  public  entities,  which meet the
     definition of small business  issuer under SEC  Regulation  S-B, must apply
     FIN 46 to the first interim or annual reporting period ended after December
     15, 2004. The effect of the adoption of this new  accounting  pronouncement
     is not expected to have a significant impact on the Company's  consolidated
     financial statements.

                                      13
<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,  dependence on a limited  number of
customers,  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 primarily  operates as an application  service  provider  ("ASP"),
that markets an integrated  transaction  based "fee for service" offering called
Invoices  On-Line (IOL), an electronic  invoice  presentment and payment (EIP&P)
service  that  processes  high  volumes  of   transactional   data  for  invoice
presentment  purposes  delivered via the Internet on a global basis on behalf of
our.  IOL is the  Company's  primary  offering  and it is a  globally  delivered
service that provides electronic invoice  presentation in more than 20 different
countries  around  the  globe  and in more  than 10  languages  and  currencies,
including Japan. Direct Insite currently hosts several million invoices that are
accessible "on-line" via the Internet 24 hours per day, seven days per week, 365
days per year. IOL is a uniquely  positioned  service  offering in the industry,
the service is designed to handle the complex  invoicing found in today's global
business  environment.  The solution  allows  Global 1000  companies to receive,
route, approve and pay invoices on- line in the local language and currency.  By
automating the traditional  paper-based  invoicing  process,  customers now have
easy and quick access to line-item billing information, reporting and analytics.
With the  enhanced  level of accuracy  provided  by IOL,  invoice  disputes  are
greatly reduced and overall customer satisfaction is substantially increased.

Direct  Insite also  provides  additional  service  offerings in the form of its
patented  dbExpress TM  technology,  a management  information  tool that allows
users  to  visually  data  mine  large  volumes  of  transactional  data via the
Internet.  A complete  Internet Customer Care tool set integrated with the EIP&P
product set is also  available.  We operate fully redundant data centers located
at our main  office in  Bohemia,  N.Y.  and in Newark,  NJ. Our  facility in New
Jersey is space leased at an International Business Machines ("IBM"), e-business
Hosting  Center.  This  co-location  /  redundancy  feature  enables us to offer
virtually down time free service.

This suite of services enables us to provide a comprehensive  Internet delivered
service   including  the  processing  and   consolidation   of  invoice  related
transaction  records and  supporting  information  through  all of the  internal
workflow management processes including an electronically delivered invoice with
customer analytics including the ability to dispute any line item of any invoice

                                       14
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

and  pay  the  invoice  through  multiple   electronic  payment  options.   This
comprehensive  service  offering  provides back office  operations,  reduces our
customers'  costs and provides for improved  customer  service by providing  our
customer's  customer with easy access to all of the detailed  information  about
their invoice.

Currently, IBM, our largest customer,  representing approximately 91% and 96% of
our revenue  for the three and nine month  periods  ended  September  30,  2004,
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, 7 days a week, 365 days a year.

As  disclosed in Note 6 to the  accompanying  Condensed  Consolidated  Financial
Statements,  during the nine  months  ended  September  30,  2004,  we  received
proceeds  from  the  sale  of  Redeemable  Preferred  Series  C  Stock  totaling
$1,410,000  and as discussed  in Note 10  subsequent  to  September  30, 2004 we
received proceeds of $100,000 from the sale of Series D Preferred stock.

Results of operations

For the three and nine month periods ended  September 30, 2004 we had net losses
from continuing operations of $559,000 and $1,186,000, respectively, compared to
net losses from  continuing  operations  of $506,000 and  $2,212,000 in the same
periods in 2003. This significant improvement of a 46% reduction in the loss for
the nine month period ended  September 30, 2004 is the result of our significant
efforts to streamline our operations and reduce our operating costs as discussed
below.  Net losses for the three and nine month periods ended September 30, 2004
were $561,000 and $926,000, respectively, compared to net losses of $828,000 and
$3,151,000  for the same  periods in 2003.  This  includes  income  (loss)  from
discontinued  operations  of ($2,000)  and  $260,000 in the three and nine month
periods ended September 30, 2004,  respectively.  This income is principally the
result of recognizing  income related to deferred revenue of $180,000 and a gain
of approximately $83,000 on the settlement of the office lease included in other
income of the discontinued  operation.  The results for the first nine months of
2004 may not be indicative of results for subsequent quarters or for the year.

For the three months ended  September 30, 2004 revenue  decreased by $436,000 or
21.4% to  $1,598,000  compared to revenue of  $2,034,000  for the same period in
2003.  This  decrease  is  primarily  attributable  to a decrease in Telecom ASP
services  compared  to the  same  period  in  2003,  and a  decrease  in  custom
engineering  fees.  The  decrease  in  custom   engineering  fees  is  primarily
attributed to a delay in certain  development  projects by the  Company's  major
customer. These delayed development projects are expected to be completed in the
fourth  quarter of 2004 and the first quarter of 2005. For the nine months ended
September 30, 2004 revenue from continuing operations was $5,421,000, a decrease
of  $507,000  (8.6%)  compared to revenue of  $5,928,000  for the same period in
2003. We expect  revenue to improve in the fourth quarter of 2004 as a result of
additional revenue from a new customer and further increases in engineering fees
from  IBM  as we  expand  the  deployment  of  our  ASP  services  and  complete
development projects that had been delayed.

In 2003, the Company embarked on a major cost reduction program, including among
other  things,  staff  reductions,   pay  rate  reductions  and  elimination  of
non-essential  expenses.  These  efforts are  reflected  in the cost  reductions
discussed  below.  Certain  of  these  reductions,  particularly  the  pay  rate
reductions,  are temporary in nature, as it is the Company's intent to reinstate
the pay rate reductions at such time as the Company's operating results and cash
flow permit.

Costs of operations,  research and development decreased by $187,000 (17.7%) and
$624,000  (19.2%) for the three and nine month periods ended September 30, 2004,
respectively,  compared  to the  same  periods  in  2003.  These  costs  consist
principally   of  salaries  and  related   expenses  for  software   developers,
programmers,  custom  engineers,  network  services,  and  quality  control  and
assurance.  Also included are network costs, costs of the production co-location
facility and other expenses  directly related to our custom  engineering and ASP
production  services.  The decrease in costs is principally  due to decreases in
personnel  wages and  benefit  costs,  a decrease in costs for  software,  and a

                                       15
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

decrease in  professional  fees,  offset by an increase in rental  costs for our
co-location   production   facility.   All  other  operating  expenses  remained
relatively flat.

Sales and marketing costs decreased  $121,000  (23.9%) and $456,000  (27.5%) for
the three  and nine  month  periods  ended  September  30,  2004,  respectively,
compared to the same periods in 2003.  Salaries and related  costs  decreased by
$234,000  for the nine months  ended  September  30,  2004,  primarily  due to a
decrease in personnel and salary reductions.  Also, consulting fees were reduced
by $198,000, while all other costs were reduced by $24,000, net.

General and administrative costs decreased $127,000 (15.5%) and $433,000 (17.1%)
for the three and nine month  periods ended  September  30, 2004,  respectively,
compared  to the same  periods in 2003.  Salaries  and related  costs  decreased
$308,000  for the nine  months  ended  September  30,  2004,  principally  due a
decrease in  personnel  and salary  reductions,  and travel and meeting  expense
decreased $126,000.

Depreciation and amortization  expense decreased by $42,000 (24.3%) and $105,000
(20.2%)  for the  three  and  nine  month  periods  ended  September  30,  2004,
respectively, primarily due to fully amortizing certain software costs and other
computer equipment and a lower rate of investment in new software and equipment.


Financial Condition and Liquidity

For the nine months  ended  September  30,  2004,  we had a net loss of $926,000
compared  to a net loss of  $3,151,000  for the  same  period  in 2003.  We used
$979,000  in cash for  continuing  operations  in the first nine  months of 2004
compared to $1,135,000  for the same period in 2003, an  improvement of $156,000
or 13.7%. Cash used in discontinued  operations was $208,000 for the nine months
ended September 30, 2004, compared to $758,000 for the same period in 2003.

We funded the shortfall in cash from  operations  primarily  through the sale of
redeemable preferred stock totaling $1,410,000.

Cash  used  in  operating  activities,  including  cash  used  for  discontinued
operations,  for the nine  months  ended  September  30,  2004  was  $1,187,000,
consisting of the net loss of $926,000, offset by non-cash expenses of $419,000,
including depreciation and amortization of $413,000.  This is further reduced by
an  increase in  accounts  receivable  and other  current  assets of $29,000,  a
decrease in accounts  payable and accrued  expenses of $87,000 and a decrease in
deferred revenue of $96,000.  Additionally,  cash used in operations was reduced
by the  decrease  in net  assets  attributable  to  discontinued  operations  of
$468,000.

Cash  used in  investing  activities  was  $90,000  for the  nine  months  ended
September  30,  2004,  compared  to $309,000  for same period in 2003.  This was
principally expenditures for property and equipment.

Cash provided by financing  activities  totaled  $1,342,000  for the nine months
ended  September  30,  2004,  compared to  $1,651,000  for the nine months ended
September  30, 2003.  As noted above,  we received net proceeds from the sale of
Series C Preferred  stock of $1,410,000.  We also repaid  $198,000 of long- term
debt and capital lease  obligations  in the first nine months of 2004.  Advances
from lenders for receivables financing increased by $130,000 in 2004.

Management's Liquidity and Financing Plans

In order to meet our cash needs 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.

     --   In the  second  half of 2003 we  embarked  on a major  cost  reduction
          program,  including  among other things,  staff  reductions,  pay rate
          reductions, and elimination of non-essential expenses. We believe that

                                       16
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

          this will reduce our  operating  costs in excess of $1.6 million on an
          annual basis. As demonstrated by the improved operating performance in
          the first nine months of 2004, we believe these cost  reductions  have
          had,  and will  continue to have, a positive  impact on our  operating
          results.  We note  that it is our  intent  to  reinstate  the pay rate
          reductions  as soon as practical  and our  operating  results and cash
          flows permit

     --   In December 2003 we closed the operations of our Platinum  subsidiary.
          Platinum had  experienced  losses and had  significant  cash needs. We
          estimate that this action will reduce our operating costs in excess of
          $1,200,000 annually.  During the nine months ended September 30, 2004,
          we used cash of $208,000 for the  discontinued  operations of Platinum
          compared to $758,000 for the same period in 2003.

     --   We intend to raise additional capital through private equity offerings
          and borrowing. In this regard in December 2003, as discussed above, we
          initiated the sale of Series C Preferred stock and as of September 30,
          2004 had net proceeds from these sales of $1,940,000.  As discussed in
          Note 10 to the financial statements,  subsequent to September 30, 2004
          we began to raise  additional  capital  through  the sale of  Series D
          Preferred  stock and Senior Notes,  and as of October 31, 2004 we have
          received  proceeds  from  this  sale  of  $100,000.  There  can  be no
          assurance,  however,  that we will be able to raise additional capital
          through equity sales and/or borrowing.

     --   We continue to strive to increase our revenue through  offering custom
          engineering  services,  expanding and  enhancing our existing  product
          offerings such as IOL, and introducing new product offerings.  In 2003
          our revenues from continuing  operations  increased  $827,000 or 12.5%
          over  revenues in 2002.  For the first nine months of 2004 our revenue
          from continuing  operations was lower than revenue for the same period
          in 2003,  however,  we anticipate that revenue for the total year 2004
          will exceed 2003 revenue.

     --   We continue to expand our  marketing  efforts in order to increase our
          customer base. In this regard,  in 2003, we became a business  partner
          with IBM and through this  relationship  will work with IBM to achieve
          sales to new  customers.  We will continue to pursue  similar  channel
          partner opportunities.  In addition, in June 2004 the Company signed a
          new contract for ASP services  with a new customer that is expected to
          produce significant revenue in 2004 and beyond.

We believe that our plans and new  initiatives  as discussed  above will lead to
positive  cash  flows and  profitability.  While we pursue  these  goals we also
believe that our ability to raise  additional  capital  through  equity and debt
placements  will  provide  sufficient  cash to meet  our  requirements  at least
through  September 30, 2005.  There can be no assurance,  however,  that we will
achieve our cash flow and profitability  goals, or that we will be able to raise
additional  capital  sufficient to meet our operating  expenses or implement our
plan. In such event,  we may have to revise our plans and  significantly  reduce
our  operating  expenses,  which  could  have an adverse  effect on revenue  and
operations in the short 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.

                                       17
<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
(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.

                                       18
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

                                   SIGNATURES


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




DIRECT INSITE CORP.



/s/ James A. Cannavino
----------------------
James A. Cannavino, Chief Executive Officer                    November 19, 2004



/s/  Michael J. Beecher
-----------------------
Michael J. Beecher, Chief Financial Officer                    November 19, 2004

                                       19