10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q/A

(Amendment No. 1)

(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, 2011

OR

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

For the transition period from ______ to ______

Commission File No. 0 – 20660

DIRECT INSITE CORP.

(Exact name of registrant as specified in its charter)

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

13450 West Sunrise Boulevard, Suite 510, Sunrise, FL	33323
(Address of principal executive offices)	(Zip Code)

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

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

Yes  x      No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  x      No  o

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

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

The number of shares of $.0001 par value stock outstanding as of November 14, 2011 was: 12,093,734

EXPLANATORY NOTE

Direct Insite Corp. (the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (“Amendment No. 1”) solely to include XBRL (Extensible Business Reporting Language) information in Exhibit 101 that was inadvertently excluded from our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2011, filed on November 14, 2011 (the “Original Filing”), as provided for under Rule 405 of the Securities and Exchange Commission’s Regulation S-T. This Amendment No. 1 makes no other changes to the Original Filing.

Exhibit 101 provides the following items formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010; (ii) Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2011 and 2010 (Unaudited); (iii) Condensed Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2011 and 2010 (Unaudited); and (iv) Notes to Condensed Consolidated Financial Statement (Unaudited).

DIRECT INSITE CORP. AND SUBSIDIARIES

PART II - OTHER INFORMATION

Item 6. Exhibits

31.1 Certification of Principal Executive Officer pursuant to Rules 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

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

32.1 Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

32.2 Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

101.INS XBRL Instance Document

101.SCH XBRL Schema Document

101.CAL XBRL Calculation Linkbase Document

101.LAB XBRL Label Linkbase Document

101.PRE XBRL Presentation Linkbase Document

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.
		(Registrant)
Date: November 15, 2011	By	/s/ Matthew E. Oakes
		Matthew E. Oakes
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: November 15, 2011	By :	/s/ Sandra Wallace
		Sandra Wallace
		Acting Chief Financial Officer
		(Principal Accounting Officer and
		Principal Financial Officer)

EX-31.1

EXHIBIT 31.1

DIRECT INSITE CORP. AND SUBSIDIARIES

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Matthew E. Oakes, certify that:

1. I have reviewed this report on Form 10-Q/A of Direct Insite Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):  

a. All significant deficiencies and material weaknesses in the design or operation of internal control     over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 15, 2011	/s/ Matthew E. Oakes
	Matthew E. Oakes
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

DIRECT INSITE CORP. AND SUBSIDIARIES

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Sandra Wallace, certify that:

1. I have reviewed this report on Form 10-Q/A of Direct Insite Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.  Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. ontrol over financial

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):  

a.  All significant deficiencies and material weaknesses in the design or operation of internal control     over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 15, 2011	/s/ Sandra Wallace
	Sandra Wallace
	Acting Chief Financial Officer
	(Principal Accounting Officer and
	Principal  Financial Officer)

EX-32.1

EXHIBIT 32.1

DIRECT INSITE CORP. AND SUBSIDIARIES

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Direct Insite Corp. (the “Company”) on Form 10-Q/A for the three month period ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Matthew E. Oakes, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 15, 2011	/s/ Matthew E. Oakes
	Matthew E. Oakes
	President and Chief Executive Officer
	(PrincipalExecutive Officer)

EX-32.2

EXHIBIT 32.2

DIRECT INSITE CORP. AND SUBSIDIARIES

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Direct Insite Corp. (the “Company”) on Form 10-Q/A for the three month period ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sandra Wallace, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 15, 2011	/s/ Sandra Wallace
	Sandra Wallace
	Acting Chief Financial Officer
	(Principal Accounting Officer and
	Principal Financial Officer)

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $) In Thousands, except Share data	Sep. 30, 2011	Dec. 31, 2010
Current assets
Allowance for doubtful accounts	$ 0	$ 0
Shareholders' equity
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (in shares)	2,000,000	2,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	12,133,661	11,717,310
Common stock, shares outstanding (in shares)	12,093,734	11,677,383
Common stock in treasury (in shares)	24,371	24,371

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) [Abstract]
Revenue	$ 2,263	$ 2,316	$ 6,416	$ 7,210
Costs and expenses
Operations, research and development	945	818	2,708	2,620
Sales and marketing	586	422	1,558	1,296
General and administrative	454	717	1,837	2,189
Severance pay to former CEO	0	0	620	0
Depreciation and amortization	74	64	224	201
Total costs and expenses	2,059	2,021	6,947	6,306
Operating income (loss)	204	295	(531)	904
Other income (expense)
Change in fair value of warrant liability	0	0	0	221
Reimbursed proxy costs	14	0	(181)	0
Loss on disposal of fixed assets	(1)	0	(2)	0
Other income, net	0	1	0	27
Interest expense, net	(1)	(3)	(9)	(16)
Income (Loss) before provision for income tax	216	293	(723)	1,136
Provision for income taxes	0	0	0	20
Net income (loss)	216	293	(723)	1,116
Preferred stock dividends	0	0	0	(42)
Net income (loss) attributable to common shareholders	$ 216	$ 293	$ (723)	$ 1,074
Basic income (loss) per share attributable to common shareholders (in dollars per share)	$ 0.02	$ 0.03	$ (0.06)	$ 0.09
Diluted income (loss) per share attributable to common shareholders (in dollars per share)	$ 0.02	$ 0.03	$ (0.06)	$ 0.09
Basic weighted average common shares outstanding (in thousands of shares)	11,914	11,563	11,776	11,426
Diluted weighted average common shares outstanding (in thousands of shares)	11,993	11,695	11,776	11,628

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Document And Entity Information (USD $)	9 Months Ended
	Sep. 30, 2011	Nov. 09, 2011	Jun. 30, 2010
Entity Registrant Name	DIRECT INSITE CORP
Entity Central Index Key	0000879703
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 5,154,739
Entity Common Stock, Shares Outstanding		12,093,734
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2011

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Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes [Abstract]

Income Taxes

7. Income Taxes

In its interim financial statements the Company follows the guidance in ASC 270, “Interim Reporting” (“ASC 270”) and ASC 740, “Income Taxes” (“ASC 740”) whereby the Company utilizes the expected annual effective tax rate in determining its income tax provisions for the interim period's income or loss.  The Company reviewed previous positive and negative evidence and also reviewed its expected taxable income for future periods and concluded that it is more likely than not that approximately $2,867,000 of tax benefits related to net operating loss carry-forwards will be utilized in future tax years.  In addition, the Company expects to provide a valuation allowance on the remaining future tax benefits until it can sustain a level of profitability that demonstrates its ability to utilize the remaining assets, or other significant positive evidence arises that suggests its ability to utilize the remaining assets.  The Company will continue to reassess its reserves on deferred income tax assets in future periods on a quarterly basis.

See notes to condensed consolidated financial statements.

At December 31, 2010, the Company had federal and state net operating loss carry forwards (“NOLs”) remaining of approximately $52 million and $8 million, respectively, which may be available to reduce taxable income, if any.  Approximately $18 million and $9 million of Federal NOLs will expire in 2011 and 2012, respectively, with the remaining $25 million expiring in 2019 through 2026.

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Stock Based Compensation

9 Months Ended

Sep. 30, 2011

Stock Based Compensation [Abstract]

Stock Based Compensation

3. Stock Based Compensation

Stock Options

The Company accounts for stock options using the fair value recognition provisions of Accounting Standards Codification (“ASC”) 718, “Compensation-Stock Compensation”.  Compensation expense for options for the three and nine months ended September 30, 2011 was $5,000 and $45,000 respectively.  For the three and nine month periods ended September 30, 2010 there was no compensation expense for options.  At September 30, 2011, there was $10,000 of unearned compensation costs related to stock options granted.

Nonqualified and incentive stock options have been granted to directors, officers and employees of the Company under our Stock Option Plans.  Options generally vest over 3 years and expire five years from the date of the grant.  At September 30, 2011, 2,659,477 shares were authorized for issuance under the stock option plans.  Awards that expire or are cancelled without delivery of shares generally become available for issuance under the plans.  The Company issues new shares to satisfy stock option exercises.  Options granted during the nine months ended September 30, 2011 and 2010 were 77,500 and 0, respectively (see Note 5).

During the nine months ended September 30, 2011, the Company granted 22,500 options to the current CEO with an exercise price of $1.15.  The options have a fair value of $16,000 determined using the Black-Sholes pricing model.  The key assumptions used in the model were a volatility of 102.0%, a dividend rate of 0%, a risk free rate of 0.33%, and an expected life of 2.7 years.  The Company granted 55,000 options to employees with an exercise price of $1.20.  The options have a fair value of $40,000 determined using the Black-Sholes pricing model.  The key assumptions used in the model were a volatility of 103.0%, a dividend rate of 0%, a risk free rate of 0.62%, and an expected life of 2.5 years.  No options were issued during the nine months ended September 30, 2010.

A summary of option activity under the plans for the nine months ended September 30, 2011 is as follows:

	Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate  Intrinsic Value (in thousands)
Balance, January 1, 2011		425		$	0.78
Granted		78		$	1.19
Exercised		(350	)	$	0.62
Canceled		--			--
Forfeited		( 25	)	$	1.50
Balance, September  30, 2011		128		$	1.31		3.5		--
Exercisable, September  30, 2011		113		$	1.33		3.3		--

The total fair value of options vested during the nine months ended September 30, 2011 and 2010 was $45,000 and $0, respectively.

Restricted Stock Grants

During the nine months ended September 30, 2011 the Company granted approximately 111,000 shares to directors as part of their compensation.  The stock grants had a fair value of approximately $86,000 based on the closing price of the stock on the date of the grant.  The stock grants vest over the two year period from January 1, 2011 through December 31, 2012.

See notes to condensed consolidated financial statements.

A summary of the status of the Company's restricted non-vested shares issued pursuant to employment and service agreements as of September 30, 2011 and changes during the nine months ended September 30, 2011 is presented below:

Non-Vested Shares	Shares (in thousands)			Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2011		26		$	0.95
Granted		111		$	0.78
Vested		(61	)	$	0.81
Forfeited		(29	)	$	0.62
Non-vested at September 30, 2011		47		$	0.94

For the three months ended September 30, 2011 and 2010 stock compensation expense for stock grants was $10,000 and $135,000, respectively.  For the nine months ended September 30, 2011 and 2010 stock compensation expense for stock grants was $50,000 and $404,000, respectively.  At September 30, 2011, the future expected expense for non-vested shares is $44,000 and will be recognized on a straight-line basis over the period October 1, 2011 through December 31, 2012.

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Related Party Transactions

9 Months Ended

Sep. 30, 2011

Related Party Transactions [Abstract]

Related Party Transactions

9. Related Party Transactions

During the nine months ended September 30, 2011 the Company accrued $620,000, included in general and administrative expense, for severance payable to the former chief executive officer, in accordance with his contract.  In addition, the Board of Directors authorized the Company to reimburse Metropolitan Venture Partners Corp. and S.A.V.E. Partners III,LLC $181,000 for the costs they incurred related to annual meeting proxy solicitations.

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Subsequent Events

9 Months Ended

Sep. 30, 2011

Subsequent Events [Abstract]

Subsequent Events

10. Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.  Based upon the evaluation, the Company did not identify any other recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

See notes to condensed consolidated financial statements.

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New Accounting Pronouncements

9 Months Ended

Sep. 30, 2011

New Accounting Pronouncements [Abstract]

New Accounting Pronouncements

8. New Accounting Pronouncements

The Company does not believe any recently issued but not yet effective accounting standards, if currently adopted, would have a material effect of the consolidated financial position, results of operations and cash flows.

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Interim Financial Information

9 Months Ended

Sep. 30, 2011

Interim Financial Information [Abstract]

Interim Financial Information

1. Interim Financial Information

The accompanying unaudited condensed consolidated interim financial statements include the accounts of Direct Insite Corp. and its subsidiaries (“Direct Insite” or the “Company”).  All intercompany balances and transactions have been eliminated in consolidation.  The condensed consolidated balance sheet as of September 30, 2011, and the condensed consolidated statements of income and cash flows for the three and nine months ended September 30, 2011 and 2010, have been prepared by the Company and are not audited.  These unaudited, condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements.  In addition, the December 31, 2010 balance sheet data was derived from the audited consolidated financial statements, but does not include all disclosures required by GAAP.  These interim condensed consolidated financial statements include all adjustments which management considers necessary for a fair presentation of the financial statements and consist of normal recurring items.  The results of operations for the three and nine months ended September 30, 2011, are not necessarily indicative of results that may be expected for any other interim period or for the full year.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2010 included in the Company's Form-10K.  The accounting policies used in preparing these unaudited condensed consolidated financial statements are consistent with those described in the audited December 31, 2010 consolidated financial statements.

Use of Estimates

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

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Debt

9 Months Ended

Sep. 30, 2011

Debt [Abstract]

Debt

4. Debt

Notes payable

At September 30, 2011 and December 31, 2010, notes payable consist of $117,000 and $261,000, respectively, of borrowings for the purchase of equipment.  These notes bear interest at rates ranging from 8.0% to 9.5% per year and mature through August 2013.  The notes are collateralized by the equipment purchased with net book values of $112,000 and $237,000, at September 30, 2011 and December 31, 2010, respectively.

The Company entered into a loan agreement with JPMorgan Chase Bank, NA on May 31, 2011.  The agreement provides a revolving line of credit up to $1,000,000 against 80% of eligible assets (as defined) at a rate of Libor plus 2%.  The line of credit is collateralized by the Company's accounts receivable, is for the term of 12 months, and provides for financial covenants.  At September 30, 2011, the Company has not drawn any funds from the line of credit.

Capitalized lease obligations

The Company has equipment under a capital lease obligation expiring in 2014.  The assets and liabilities under capital leases are recorded at the lower of the present values of the minimum lease payments or the fair values of the assets.  The interest rate pertaining to this capital lease is 3.3%.  At September 30, 2011, the gross and net book value of the related assets is approximately $42,000 and $32,000, respectively.

See notes to condensed consolidated financial statements.

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Shareholders' Equity

9 Months Ended

Sep. 30, 2011

Shareholders' Equity [Abstract]

Shareholders' Equity

5. Shareholders' Equity

Common Stock and Option Issuance

For the nine months ended September 30, 2011 111,000 shares of restricted stock were granted to directors of the Company at a fair value of $86,000, as set forth in Note 3.  The Company also issued 350,000 shares on the exercise of 350,000 options for $217,000 to the former CEO.

During the nine months ended September 30, 2010 the Company issued 202,500 restricted common shares with a fair value of $426,000 based on the closing share price on the date of the grant to certain officers under employment agreements.  The Company also issued 151,283 shares on exercise of 345,000 options on a cashless basis.  In addition, the Company considers outstanding 75,192 common shares held in deferred compensation accounts for directors.

Earnings Per Share

The Company displays earnings per share in accordance with ASC 260, “Earnings Per Share”.  ASC 260 requires dual presentation of basic and diluted earnings per share (“EPS”).  Basic EPS includes no dilution and is computed by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding for the period.

Diluted EPS includes the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.  Outstanding stock options, warrants and other potential stock issuances are not included in the computation when their effect would be anti-dilutive.  The following table presents the shares used in the computation of diluted earnings per share for the three and nine months ended September 30, 2011 and 2010 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Weighted Average Common shares outstanding		11,914		11,563		11,776		11,426
Options to purchase common stock		71		131		--		198
Restricted stock grants		8		1		--		4
Total diluted shares		11,993		11,695		11,776		11,628

Securities that could potentially dilute basic EPS in the future, that were not included in the computation of the diluted EPS consist of the following (in thousands):

	Three Months Ended September 30,				Nine Months Ended  September 30,
	2011		2010		2011		2010
Options to purchase common stock		153		75		153		75
Restricted stock grants		24		99		47		99
Total potential common shares		177		174		200		174

See notes to condensed consolidated financial statements.

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Products and Services

9 Months Ended

Sep. 30, 2011

Products and Services [Abstract]

Products and Services

6. Products and Services

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2011
SaaS fees	$	1,924	$	2,106	$	5,740	$	6,482
Custom engineering fees		339		210		676		728
Total Revenue	$	2,263	$	2,316	$	6,416	$	7,210

Major Customers

For the three and nine month periods ended September 30, 2011, HP accounted for 50.4% and 48.3% of Company revenue, respectively, compared to 48.1% and 50.9% for the three and nine month periods ended September  30, 2010, respectively.  HP utilizes the Company's products as tools to service their customers.  The Company's revenue from HP is derived from three separate and distinct agreements with HP for each of HP's customers A, B, and C.  For the three and nine months ended September 30, 2011, revenue from the contract with HP for HP customer A accounted for 18.8% and 18.9% of total revenue, respectively, compared to 23.6% and 24.6% of revenue for the three and nine months ended September 30, 2010, respectively.  For the three and nine months ended September 30, 2011, revenue from the contract with HP for HP customer B accounted for 15.0% and 15.7% of total revenue, respectively, compared to 14.7% and 14.6% of revenue for the three and nine months ended September 30, 2010, respectively.  For the three and nine months ended September 30, 2011, revenue from the contract with HP for HP customer C accounted for 16.6% and 13.7% of total revenue, respectively, compared to 9.8% and 11.7% of revenue for the three and nine months ended September 30, 2010, respectively.

For the three and nine month periods ended September 30, 2011, IBM accounted for 30.9% and 33.1% of revenue, respectively, compared to 34.0% and 33.6% for the three and nine month periods ended September 30, 2010, respectively.  For the three and nine month periods ended September 30, 2011, Siemens accounted for 10.2% and 10.9% of revenue, respectively, compared to 10.2% for both the three and nine month periods ended September 30, 2010.  Accounts receivable from these customers amounted to $1,450,000 and $1,243,000 at September 30, 2011 and December 31, 2010, respectively.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Cash flows from operating activities:
Net (loss) income	$ (723)	$ 1,116
Adjustments to reconcile net (loss) income to net cash provided by operations:
Amortization and depreciation	224	201
Stock based compensation expense	95	404
Change in fair value of warrant liability	0	(221)
Deferred rent expense	18	0
Changes in operating assets and liabilities:
Accounts receivable	(227)	(413)
Prepaid expenses and other assets	(106)	(1)
Accounts payable and accrued expenses	818	170
Deferred revenue	(69)	(5)
Net cash provided by operations	30	1,251
Cash flows used in investing activities:
Expenditures for property and equipment	(186)	(60)
Cash flows from financing activities:
Redemption of preferred stock	0	(1,100)
Stock options exercised	217	0
Stock repurchase	0	(8)
Payment of dividends on preferred stock	0	(68)
Principal payments on capital lease obligations	(8)	(5)
Repayments of long-term debt	(144)	(139)
Net cash provided by (used in) financing activities	65	(1,320)
Net decrease in cash and cash equivalents	(91)	(129)
Cash and cash equivalents - beginning of period	1,707	1,758
Cash and cash equivalents - end of period	1,616	1,629
Supplemental Disclosures:
Cash paid for interest	11	20
Cash paid for income taxes	0	26
Non-cash investing and financing activities:
Acquisition of equipment through issuance of debt	$ 42	$ 151

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The Company

9 Months Ended

Sep. 30, 2011

The Company [Abstract]

The Company

2. The Company

Direct Insite Corp. was organized as a public company, under the laws of the State of Delaware on August 27, 1987.  Direct Insite operates as a Software as a Service provider (“SaaS”), providing best practice financial supply chain automation and workflow efficiencies within the Procure-to-Pay (“PTP”) and Order-to-Cash (“OTC”) processes.  The Company's global Electronic Invoice Presentment and Payment (“EIP&P”) services automate manual business processes such as complex billing, invoice validation, invoice-to-order matching, consolidation, dispute handling, and payment processing.

As described in Note 6, the Company has three customers that accounted for approximately 92.3% and 94.7% of the Company's revenue for the nine months ended September 30, 2011 and 2010, respectively.  Loss of International Business Machines Corp. (“IBM”) or Hewlett-Packard (“HP”) would have a material adverse effect on the Company.

See notes to condensed consolidated financial statements.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Current assets
Cash and cash equivalents	$ 1,616	$ 1,707
Accounts receivable, net of allowance for doubtful accounts of $0 in 2011 and 2010	1,552	1,325
Deferred tax asset - current	750	750
Prepaid expenses and other current assets	247	159
Total current assets	4,165	3,941
Property and equipment, net	427	421
Deferred tax asset	2,117	2,117
Other assets	242	226
TOTAL ASSETS	6,951	6,705
Current liabilities
Accounts payable and accrued expenses	1,623	1,425
Accrued severance pay	620	0
Current portion of capital lease obligations	14	0
Current portion of notes payable	71	157
Deferred rent expense	18	0
Deferred revenue	0	69
Total current liabilities	2,346	1,651
Leases payable, net of current portion	20	0
Notes payable, net of current portion	46	104
Total liabilities	2,412	1,755
Commitments and contingencies
Shareholders' equity
Preferred stock, $0.0001 par value; 2,000,000 shares authorized; 0 shares issued and outstanding in 2011 and in 2010	0	0
Common stock, $0.0001 par value; 50,000,000 shares authorized; 12,133,661, and 11,717,310, shares issued in 2011 and 2010, respectively; and 12,093,734 and 11,677,383 shares outstanding in 2011 and 2010, respectively	1	1
Additional paid-in capital	115,302	114,990
Accumulated deficit	(110,436)	(109,713)
Stockholders' equity, net of treasury stock	4,867	5,278
Common stock in treasury, at cost- 24,371 shares	(328)	(328)
Total shareholders' equity	4,539	4,950
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 6,951	$ 6,705