STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2012

STOCKHOLDERS' EQUITY [Abstract]

SHAREHOLDERS EQUITY

Note 6 - Stockholders' Equity

Preferred Stock

The Company is authorized to issue 2,000,000 shares of preferred stock of which none were issued and outstanding as of March 31, 2012 and December 31, 2011.

Common Stock, Options and Stock Grants

Three Months Ended March 31, 2012

During the three months ended March 31, 2012, 23,952 restricted common shares with an aggregate grant date fair value of approximately $18,000 vested.  During the three months ended March 31, 2012, the Company granted, to two officers of the Company, options to acquire an aggregate of 480,000 shares of common stock for an exercise price of $1.15 per share, exercisable over a term of five years from the date of grant.  The options vest over a four year period, with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting in equal monthly amounts through the fourth anniversary of the grant date. The Company estimated the grant date fair value of the stock options using the Black Scholes option model and the following assumptions: volatility of 175%, risk free rate of 0.36%, dividend rate of zero, and expected term of 3.75 years.  The grant date fair value of the stock options was determined to be approximately $298,000, of which approximately $19,000 was recognized as stock compensation expense for the three months ended March 31, 2012.

            On April 15, 2012, the Company issued 261,503 shares pursuant to the Direct Insite Corp. Directors' Deferred Compensation Plan dated January 1, 2008 to two former Directors for past services.

Three Months Ended March 31, 2011

During the three months ended March 31, 2011, 16,685 restricted common shares with a grant date fair value of approximately $14,000 vested.

Common Stock Purchase Plan

In September 2009, the Company's Board of Directors adopted a plan to purchase a certain number of shares from option holders on the exercise of options to encourage the option holders to exercise their options and to provide the option holder with a method to have cash for the tax on the exercise.  The plan provides that the price to be paid for any shares purchased shall be the closing price of the common stock on the date of exercise.  Further the Company will only provide up to $300,000 for all such purchases for all option exercises in the aggregate in any twelve month period.  During the three months ended March 31, 2012 and 2011, the Company purchased no shares under the plan.

Stock Option Plans

The Company grants options under multiple stock-based compensation plans that do not differ substantially in the characteristics of the awards.  Nonqualified and incentive stock options have been granted to directors, officers and employees of the Company under the Company's Stock Option Plans.  Options generally vest over three to four years and expire five years from the date of the grant.  As of March 31, 2012, 693,785 shares were available 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.

Stock Option Plans (continued)

The following is a summary of stock option activity for three months ended March 31, 2012, relating to all of the Company's common stock plans:

			Weighted		Weighted Average		Aggregate
			Average		Remaining		Intrinsic
	Shares		Exercise		Contractual Term		Value
	(in thousands)		Price		(in years)		(in thousands)
Outstanding at January 1, 2012		128	$	1.31		3.0	$	--
Granted		480	$	1.15		4.8	$	--
Outstanding at March 31, 2012		608	$	1.18		4.4	$	--
Exercisable at March 31, 2012		128	$	1.31		3.0	$	--

The following table summarizes stock option information as of March 31, 2012:

Outstanding Options
				Weighted Average
		Number Outstanding		Remaining	Options Exercisable
Exercise Prices		(in thousands)		Contractual Life	(in thousands)
$	1.50		50	1.0 years		50
$	1.20		55	4.2 years		55
$	1.15		503	4.6 years		23
Total			608	4.4 years		128

As of March 31, 2012, there was approximately $279,000 of unrecognized compensation costs related to stock options outstanding.

Restricted Stock Grants

A summary of the status of the Company's non-vested stock grants as of March 31, 2012 and changes during the three months ended March 31, 2012 is presented below:

Non-Vested Shares	Shares (in thousands)			Weighted-Average Grant Date Fair Value
Non-Vested at December 31, 2011		35		$	0.93
Granted		121		$	0.66
Vested		(24	)	$	0.76
Non-Vested at March 31, 2012		132		$	0.71

The future expected expense for non-vested shares is approximately $95,000 and will be recognized as expense through December 31, 2013.