10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2013

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 number: 0-20660

DIRECT INSITE CORP.

(Exact name of registrant as specified in its charter)

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

500 East Broward Boulevard, Suite 1550 Fort Lauderdale, Florida	33394
(Address of principal executive offices)	(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $.0001	OTC – BB

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No þ

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 þ  No ¨

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 þ  No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,  and will not be contained, to the best of Registrant's knowledge, in definitive  proxy or information statements  incorporated  by  reference  in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	þ

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the closing price as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $8,969,843

As of March 15, 2014, there were 12,723,460 shares of the registrant’s Common Stock outstanding.

DIRECT INSITE CORP.

TABLE OF CONTENTS

PART I.		1-8
ITEM 1.	BUSINESS	1
ITEM 1A.	RISK FACTORS	8
ITEM 1B.	UNRESOLVED STAFF COMMENTS	8
ITEM 2.	PROPERTIES	8
ITEM 3.	LEGAL PROCEEDINGS	8
ITEM 4.	MINE SAFETY DISCLOSURES	8
PART II.		9-18
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	9
ITEM 6.	SELECTED FINANCIAL DATA	9
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	9
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	17
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	17
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	17
ITEM 9A.	CONTROLS AND PROCEDURES	17
ITEM 9B.	OTHER INFORMATION	18
PART III.		19-29
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	19
ITEM 11.	EXECUTIVE COMPENSATION	23
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	27
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	28
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	28
PART IV.		30-34
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	30
EXHIBIT INDEX		30
SIGNATURES		34

PART I

Item 1. BUSINESS

FORWARD-LOOKING STATEMENTS

All statements other than statements of historical fact included in this Form 10-K including, without limitation, statements under, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward‑looking statements.  When used in this Form 10-K, words such as “anticipate”, “believe”, “estimate”, “expect”, “intend” and similar expressions, as such words or expressions relate to us or our 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, our management.  Actual results could differ materially from those contemplated by the forward‑looking statements as a result of certain factors including but not limited to, fluctuations in future operating results, technological changes or difficulties, management of future growth, expansion of international operations, current economic conditions, the risk of errors or failures in our software products, dependence on proprietary technology, competitive factors, risks associated with potential acquisitions, the ability to recruit personnel, and 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.  All subsequent written and oral forward‑looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this paragraph.

OVERVIEW

Direct Insite Corp., originally named Unique Ventures, Inc., (hereinafter referred to at times as “Direct Insite”, “our”, “we”, or the “Company”) was incorporated under the laws of the State of Delaware on August 27, 1987.  We consummated our initial public offering in 1992.  In May 1990, we changed our name to Computer Concepts, Inc. and in August 2000, we changed our name to Direct Insite Corp.

Our Business

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 and Order-to-Cash processes. Specifically, Direct Insite’s global electronic invoice (“e-invoice”) management services automate complex manual business processes such as invoice validation, order matching, consolidation, dispute handling, and e-payment processing in a business-to-business transaction based “fee for services” business model.

Through the automation and workflow of Procure-to-Pay and Order-to-Cash processes and the presentation of invoices, orders, and attachment data via a self-service portal, Direct Insite is helping our customers reduce manual invoice-to-order reconciliation costs, reduce the frequency of inquiries and disputes, improve cash flow, increase competitiveness and improve customer satisfaction.

Direct Insite is currently delivering service and business value across the Americas, Europe, and Asia, including more than 100 countries, in 35 currencies and 17 languages. Direct Insite processes more than $125 billion in invoice value annually on behalf of our clients.  Direct Insite processes, distributes and hosts millions of invoices, purchase orders, and supporting attachment documents, making them accessible on-line with an internet self-service portal.  Suppliers, customers, and internal departments, such as Finance and Accounting or Customer Service users, can easily access their business documents.

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Our revenue comes from (i) recurring, on-going services that are billed monthly; and (ii) non-recurring, professional services derived from the configuration of our software platform.

HP Enterprise Services (“HP”) accounted for approximately 45% and 49% of our revenue for the years ended December 31, 2013 and 2012, respectively. We currently have three principal contracts with HP providing e-invoice services.  These contracts have terms ranging from one to five years.  The contracts may be terminated by either party on ninety days advance written notice.  In February 2013, we were notified by HP that one of its clients (which represented a fourth contract), representing approximately 9% and 14% of our revenue for the years ended December 31, 2013 and 2012, respectively, was terminating its contract with HP effective March 31, 2013. As disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on July 24, 2013, despite efforts to negotiate a direct contractual agreement with this client, the client ultimately decided to sunset its use of our services. As such, we did not record revenue from this client after June 30, 2013.

International Business Machines, Inc. (“IBM”), representing approximately 32% and 33% of our revenue for the years ended December 31, 2013 and 2012, respectively, utilizes our suite of services to allow its customers from around the globe to receive, analyze, dispute and cost allocate all of their invoice data in their local language and currency via the internet.  We have two principal contracts with IBM to provide e-invoice services for substantially all of IBM’s operating units. On October 28, 2013, one of these contracts was extended for a three-year period, through December 31, 2016, and is renewable annually thereafter.  The other contract was renewed through December 31, 2014, and is renewable annually thereafter.  The contracts may be terminated by either party with ninety days advance written notice.

PRODUCTS AND SERVICES

Direct Insite specializes in the automation of financial supply chain best practices within the Procure-to-Pay and Order-to-Cash processes.  Direct Insite provides its SaaS and also offers specialized engineering support to implement its solutions to meet each client’s individual needs.  The following are Direct Insite’s primary service offerings:

· Procure-to-Pay: e-invoice Management for Accounts Payable

· Order-to-Cash: e-invoice Management for Accounts Receivable

Procure-to Pay: e-invoice Automation for Accounts Payable

Direct Insite’s e-invoice Management for Accounts Payable increases accounts payable productivity by streamlining and automating manual supplier invoice validation, inquiry and approval processes.

Direct Insite’s Procure-to-Pay service is focused on providing the following significant business benefits:

· Eliminate manual invoice validation processes

· Improve on-time payments and the ability to capture early payment discounts

· Increase supplier e-invoice submission

· Reduce Accounts Payable call center traffic

· Enhance supplier relationships and overall ease of business

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Supplier Self-Service Portal

Direct Insite’s Procure-to-Pay service offering includes a supplier self-service portal and e-invoice presentment capability that is able to reduce call center traffic by resolving inquiries without human intervention.  Direct Insite’s online portal allows suppliers to access their invoice status, invoice line items, attachments, payment status, and other relevant billing information on their own time, at any time and without having to call or wait for support.

Supplier Electronic Invoice Submission

Suppliers are able to submit their invoices via electronic formats and/or adapters, including web form entry, supplier networks, spreadsheet upload, and Enterprise Resource Planning (“ERP”) adapters such as Oracle, SAP, Great Plains, or legacy billing systems.  Suppliers can also perform a purchase order ‘flip’ function where customer orders can be used to automatically generate preliminary bills for review and release for payment.

Invoice Matching and Workflow Exception Handling

Direct Insite’s Procure-to-Pay service allows Accounts Payable administrators the ability to configure robust invoice validation business rules where inbound supplier invoices can be automatically matched against orders, variable consumption reports, or other business documents.  Noncompliant invoices and line items are flagged and routed for exception workflow handling.

Vendor Boarding and Supplier Services

A key component of deploying Procure-to-Pay services is to assure that suppliers register with such services and are properly ‘boarded’ into the Procure-to-Pay environment.  Direct Insite provides a complete set of suppliers’ services such as webinars, training materials, and help services embedded within the service offering.  Additionally, Direct Insite provides vendor boarding campaigns which include statistical analysis of vendor invoice submission, and calling and email programs that effectively communicate the buyer’s strategic direction to the suppliers requiring their participation.

Invoice Approval & Payment

Once invoices have been validated they can be routed to the Accounts Payable financial system for disbursement or paid within the Direct Insite self-service portal.  The service fully integrates with all of the major ERP systems, ensuring seamless system interoperability.

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Order-to-Cash: e-invoice Automation for Accounts Receivable

Direct Insite’s e-invoice Management for Accounts Receivable service offering generates a dynamic electronic invoice that facilitates customer analysis, dispute resolution, approval and payment.  The benefits include lower invoicing costs, more timely payment and improved customer satisfaction.

Direct Insite’s Order-to-Cash service offering is focused on providing the following significant business benefits:

· Reduce paper invoicing costs

· Eliminate manual invoice reconciliation, preparation and consolidation processes

· Reduce Accounts Receivable call center traffic

· Reduce customer disputes and inquiries

· Reduce Days Sales Outstanding

· Improve overall cash flow

· Increase customer satisfaction and competitive advantage

Invoice Compliance and Validation

Direct Insite’s Order-to-Cash solution allows for a preliminary invoice workflow process that automatically validates Accounts Receivable invoices against source billing documents to ensure the invoice is compliant and accurate before the invoice is finalized and distributed to the customer for payment.  During the preliminary invoice validation cycle, invoice exceptions are flagged and automatically processed for resolution.  Once the invoices have been finalized, they can be released for payment.

Invoice Attachment Processing

Direct Insite enables billers to distribute electronic attachments with their invoices to proactively provide the supporting documentation often required by their clients’ Accounts Payable departments.  Invoice attachments are presented online within an easily accessible self-service portal.  This facilitates the reconciliation process for the customer and allows for more timely payments.

Invoice Distribution and Self-Service Portal Presentment

Direct Insite’s Order-to-Cash service also supports multiple invoice distribution and presentment methods depending upon customer preferences, including online, PDF email, self-service downloads, EDI, fax, or print.  The invoice presentment capability displays invoices and attachments within a self-service web portal where customers can access their invoice, line item detail, and supporting attachments at all times.

Dispute Management

Direct Insite further supports the ability for customers to initiate online invoice or line item inquiries and disputes.  Specifically, customers can review their invoices within the self-service portal and initiate invoice or line item invoice disputes without having to reach call center support.  Once the dispute request has been initiated, customers can approve the remainder of the invoice and schedule it for payment.  Easing the dispute process is intended to support customer satisfaction and allow for partial invoice collection to improve cash flow.

4

Invoice Approval

Direct Insite provides a workflow tool with configurable rules, which customers can use to route an invoice through their corporate approval process.  This ensures that invoices are not stalled in the company’s authorization hierarchy.  Approved invoices can be routed to the ERP financial system for disbursement or paid within the Direct Insite self-service portal.  Direct Insite seeks to ensure the customer’s ERP financial system is updated seamlessly.

Invoice Payment

Direct Insite supports electronic payment of invoices using a number of financial instruments including major credit card and Automated Clearing House (“ACH”) transactions.  In order to support credit card payment, it is required that the service provider is Payment Card Industry Data Security Standard (“PCI DSS”) complaint.  PCI DSS is a set of strict requirements designed to ensure that all companies that process, store or transmitcredit card information maintain a secure environment.  Direct Insite is PCI DSS compliant.

Reporting and Data Analysis

Our Order-to-Cash service can store multiple years of online invoice, line item, dispute status, and payment history to generate online reporting and data analysis.  Customers can use the self-reporting capability to track their spending or produce detailed usage reports.  Internal Finance and Accounting administrators are able to perform online reporting to track scheduled payments or forecast inbound cash flow.

Audit and Traceability

Direct Insite’s Procure-to-Pay and Order-to-Cash service offerings support a complete audit log whereby all internal and external user actions are logged, tracked and presented in views of user activity history.  At any time, authorized administrators can review online user activity and monitor user adoption.

SALES AND MARKETING

Channels to Market

Direct Insite has two primary marketing channels: (i) direct: through our sales representatives; and (ii) indirect: through strategic partners, like HP.  These channels are supported by a technical sales support group.

Direct

Our direct sales organization consists of senior sales associates complemented by sales support resources.  The sales associates and support resources are primarily responsible for qualifying direct opportunities.  Sales associates engage in direct sales activities that include business value analysis and alignment, capabilities demonstrations, procurement and contract management.  Direct Insite’s executive management team is actively involved with and complements Direct Insite’s direct sales organization.

5

Indirect

Direct Insite continues to pursue and utilize both reseller agreements and strategic partnerships as tools in our effort to acquire new customers and revenue streams and in certain instances enhance our current offerings to existing accounts.  Direct Insite has executed reseller agreements with several business partners, such as HP, who provide Business Process Outsourcing/Financial Services and offer our Accounts Payable/Accounts Receivable Automation and Payment services to their existing clients, or in certain cases we develop and deploy a dual go-to-market strategy to new clients.  Direct Insite has formed strategic partnerships with several business partners who provide inbound mail drop boxes, paper scanning services, image capture, image and document routing and reporting services and in certain other cases, both software and financial certification and verification services.  The utilization of both these reseller agreements and strategic partnerships is a critical and cost effective way to be introduced to new customers and potential revenue streams.  Further, Direct Insite is able to leverage the investment of our partners to combine and enhance the Direct Insite suite of products that can be introduced and sold to the market.

Technical Sales Support and Post-Sales Account Management

Direct Insite has a pre-sales support staff and adds post-sales support to the existing client services management group as it secures new business.  This group is responsible for technical sales presentations, developing proposals and pricing, contract administration and post-implementation account relationship management.

Certified Partnerships

In 2010, Direct Insite achieved SAP partner certification.  As a result of the certified integration, Invoices On-Line (“IOL”) now provides seamless interoperability with more than twenty different business objects supported by SAP ERP systems.  This allows Direct Insite SAP customers the ability to automate and extend their Procure-to-Pay or Order-to-Cash processes to the cloud, including purchase order distribution, invoice receipt and validation, workflow, and electronic payments.

RESEARCH AND DEVELOPMENT

The computer software industry is characterized by rapid technological change, which requires ongoing development and maintenance of software products.  It is customary for modifications to be made to a software product as experience with its use grows or changes in manufacturers’ hardware and software so require.

We believe that our research and development staff, many with extensive experience in the industry, represents a significant competitive advantage.  As of December 31, 2013, our research and development group consisted of 30 employees.  Further, when needed, we retain the services of independent professional consultants.  We seek to recruit highly qualified employees, and our ability to attract and retain such employees is expected to be a principal factor in our success in maintaining a leading technological position.  For the years ended December 31, 2013 and 2012, research and development expenses were approximately $2,283,000 and $2,440,000, respectively.  An additional $433,911 was accounted for as capitalized software in 2013.  We believe that continued investments in research and development are required in order to remain competitive.

6

COMPETITION

We believe our competitors may provide some or all of the services we provide to the marketplace.  Our competitors offer some of the various components or functions in Accounts Receivable Automation, Accounts Payable Automation and Payments processing.  Our primary competitors include Kofax/170 Systems, OB10, Basware Corporation, Ariba, Inc., and Bottomline Technologies, among others.

Many of our current and potential competitors have greater name recognition, larger installed customer bases, longer operating histories, and substantially greater financial, technical and marketing resources than Direct Insite.  We cannot assume that current and potential competitors will not develop products that may be or may be perceived to be more effective or responsive to technological change than are our current or future products or that our technologies and products will not be rendered obsolete by such developments.  Increased competition could result in price reductions, reduced margins or loss of market share.

EMPLOYEES

We had 46 employees, of whom 44 were full-time, all in the United States, including 30 in production, development and technical support (28 full-time), 3 in sales and marketing, 7 in technical sales support and post-sales management, and 6 in corporate finance and administration.  Our future success will depend in part upon our continued ability to attract and retain highly skilled and qualified personnel.  We believe that our relations with our employees are good, and we have no collective bargaining agreements with any labor unions.

INTELLECTUAL PROPERTY

We rely on proprietary knowledge and employ various methods, including confidentiality agreements, to protect our software code, concepts, ideas and documentation of our proprietary technology. We own a copyright for Invoices on-Line (IOL).  We had a federally registered patent “dbExpress”, a data mining tool which expired in 2013.  The expiration of the patent had no impact on our business as we are no longer in the data mining industry.

Despite our efforts, unauthorized parties may attempt to copy aspects of our products, obtain and use information that we regard as proprietary or misappropriate our copyrights, trademarks, trade dress and similar proprietary rights.  In addition, the laws of some foreign countries do not protect proprietary rights to as great an extent as do the laws of the United States.  Our means of protecting our proprietary rights may not be adequate.  In addition, our competitors might independently develop similar technology or duplicate our products or circumvent any patents or our other intellectual property rights.

7

AVAILABLE INFORMATION

We make available free of charge our filings with the Securities and Exchange Commission (the “SEC”), including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.  Copies of our filings with the SEC are also available on the SEC’s website at www.sec.gov.

At December 31, 2013, our principal executive office was located at 500 East Broward Boulevard, Suite 1550, Fort Lauderdale, Florida 33394.  Our telephone number is (631) 873-2900.  Our website is www.directinsite.com.  The information on, or that can be accessed through, our website is not incorporated by reference into this annual report and should not be considered to be a part of this annual report.

Item 1A. RISK FACTORS

Not Applicable.

Item 1B. UNRESOLVED STAFF COMMENTS

Not Applicable.

Item 2. DESCRIPTION OF PROPERTIES

As of December 31, 2013, we maintained leased facilities in the locations listed below:

				Annual
Description	Location	Square Footage	Lease Term	Rental Cost
Corporate office	Ft. Lauderdale, FL	5,806	03/01/13 – 08/31/18	$	157,000
Co-location facility	Santa Clara, CA	Note 1	12/01/13 – 3/31/2014	$	45,408
Co-location facility	Miami, FL	Note 1	12/01/13 – 11/30/15	$	165,240

Note 1. The co-location facilities in Santa Clara, California and Miami, Florida provide rack space for our computer equipment and the rental is not based on square footage used.

Item 3. LEGAL PROCEEDINGS

We are not currently involved in any legal or regulatory proceeding, or arbitration, the outcome of which is expected to have a material adverse effect on our business, and no such proceedings are contemplated.

Item 4. MINE SAFETY DISCLOSURES

Not Applicable.

8

PART II

Item 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a) Market Information

Our common stock is traded on the OTC QB under the symbol “DIRI”.  The following table sets forth the high and low closing prices for our common stock by the quarters indicated:

	Closing Stock Price
	High		Low
Year ended December 31, 2013:
1st Quarter	$	1.00	$	0.76
2nd Quarter	$	1.37	$	0.93
3rd Quarter	$	1.80	$	1.16
4th Quarter	$	1.72	$	1.15
Year ended December 31, 2012:
1st Quarter	$	0.94	$	0.71
2nd Quarter	$	0.88	$	0.65
3rd Quarter	$	0.76	$	0.65
4th Quarter	$	1.22	$	0.65

(b)As of March 15, 2014 there were 2,513 stockholders of record of our common stock.

(c)In 2013 and 2012, the Company paid no dividends to stockholders. Further dividend policy will be determined by our Board of Directors based on our earnings, financial condition, capital requirements and other then existing conditions.  It is anticipated that cash dividends will not be paid to the holders of our common stock in the foreseeable future.

Item 6. SELECTED FINANCIAL DATA

Not Applicable.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company was incorporated under the laws of the State of Delaware on August 27, 1987.  We consummated our initial public offering in 1992.  In May 1990, we changed our name from Unique Ventures, Inc. to Computer Concepts, Inc., and in August 2000, we changed our name to Direct Insite Corp.

Direct Insite operates as a SaaS provider, providing best practice financial supply chain automation and workflow efficiencies within the Procure-to-Pay and Order-to-Cash processes. Specifically, Direct Insite’s global e-invoice management services automate complex manual business processes such as invoice validation, order matching, consolidation, dispute handling, and e-payment processing in a business-to-business transaction based “fee for services” business model.

Through the automation and workflow of Procure-to-Pay and Order-to-Cash processes and the presentation of invoices, orders, and attachment data via a self-service portal, Direct Insite is helping our customers reduce manual invoice-to-order reconciliation costs, reduce the frequency of inquiries and disputes, improve cash flow, increase competitiveness and improve customer satisfaction.

9

Direct Insite is currently delivering service and business value across the Americas, Europe, and Asia, including more than 100 countries, in 35 currencies and 17 languages. Direct Insite processes more than $125 billion in invoice value annually on behalf of our clients.  Direct Insite processes, distributes and hosts millions of invoices, purchase orders, and supporting attachment documents, making them accessible on-line with an internet self-service portal.  Suppliers, customers, and internal departments, such as Finance and Accounting or Customer Service users, can easily access their business documents. For more than nine years, Direct Insite has built a track record in automating some of the most demanding financial environments, including the global shared services environments for some of the world's largest companies.

HP accounted for approximately 45% and 49% of our revenue for the years ended December 31, 2013 and 2012, respectively. We currently have three principal contracts with HP providing e-invoice services.  These contracts have terms ranging from one to five years.  The contracts may be terminated by either party with ninety days advance written notice.  In February 2013, we were notified by HP that one of its clients (which represented a fourth contract), representing approximately 9% and 14% of our revenue for the years ended December 31, 2013 and 2012, respectively, was terminating its contract with HP pursuant to which the Company provided services to such client, effective March 31, 2013. As disclosed in our Current Report on Form 8-K filed with the SEC on July 24, 2013, despite efforts to negotiate a direct contractual agreement with this client, the client ultimately decided to sunset its use of our services. As such, we did not record revenue from this client after June 30, 2013.

IBM, representing approximately 32% and 33% of our revenue for the years ended December 31, 2013 and 2012, respectively, utilizes our suite of services to allow its customers from around the globe to receive, analyze, dispute and cost allocate all of their invoice data in their local language and currency via the internet.  We have two principal contracts with IBM to provide e-invoice services for substantially all of IBM’s operating units. On October 28, 2013, one of these contracts was extended for a three-year period, through December 31, 2016, and is renewable annually thereafter. The other contract was renewed for a one-year period through December 31, 2014 and is renewable annually thereafter. These contracts may be terminated on ninety days advance written notice.

SEASONALITY/QUANTITY FLUCTUATIONS

Revenue from SaaS ongoing services generally is not subject to fluctuations or seasonal flows.  However, revenue derived from custom engineering services have a tendency to fluctuate significantly based on customer demand.

Other factors, including, but not limited to, new service introductions, domestic and global economic conditions, customer budgetary considerations, and the timing of product upgrades may create fluctuations.  As a result, our operating results for any quarter are not necessarily indicative of results for any future period.

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OUR CRITICAL ACCOUNTING POLICIES

Our financial statements and the notes to our financial statements contain information that is pertinent to management’s discussion and analysis and use of estimates.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities.  Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  On a continual basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions.  After such reviews, and if deemed appropriate, those estimates are adjusted accordingly.  Actual results may vary from these estimates and assumptions under different and/or future circumstances.  Management considers an accounting estimate to be critical if:

· it requires assumptions to be made that were uncertain at the time the estimate was made; and

· changes in the estimate, or the use of different estimating methods that could have been selected, could have a material impact on the Company’s results of operations or financial condition.

The following critical accounting policies have been identified that affect the more significant judgments and estimates used in the preparation of our financial statements.  We have discussed the application of these critical accounting policies with our Audit Committee.  The following critical accounting policies are not intended to be a comprehensive list of all of the Company’s accounting policies or estimates.

Revenue Recognition

We record revenue in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition (“ASC 605”), and SEC Staff Accounting Bulletin Topic 13, Revenue Recognition in Financial Statements.  Revenue is recognized when it is both earned and realizable, that is, when the following criteria are met:

· persuasive evidence of arrangements exist;

· delivery has occurred or services have been rendered;

· the seller’s price is fixed and determinable; and

· collectability is reasonably assured.

The following are the specific revenue recognition policies for each major category of revenue.

Recurring (Ongoing Services)

We provide transactional data processing services through our SaaS software solutions to our customers.  The customer is charged a monthly fixed rate on a per transaction basis or a fixed fee based on monthly transaction volumes. Revenue is recognized as the services are provided.

Non-Recurring (Professional Services)

We provide non-recurring engineering services to our customers, which may include initial or additional development, modification, and customization services to our software platform.  Such services are billed based on: (i) hourly rates; or (ii) milestone billings.  For hourly billed services, revenue is recognized when work is performed.  For milestone billed services, revenue is recognized when the project milestone has been accepted by the customer.  We do not sell software licenses, upgrades or enhancements, or post-contract customer services.

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Income Taxes

We account for income taxes using the asset and liability method.  This method requires the determination of deferred tax assets and liabilities based on the differences between the financial statement and income tax basis of assets and liabilities, using enacted tax rates.  Additionally, net deferred tax assets are adjusted by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax assets will not be realized.  We review positive and negative evidence in conjunction with our expected taxable income for future periods to determine if it is more likely than not that it will be able to utilize the tax benefits related to net operating loss carry-forwards in future tax years.

In addition, we expect to provide a valuation allowance on the remaining future tax benefits until we can sustain a level of profitability that demonstrates our ability to utilize the remaining assets, or other significant positive evidence arises that suggests our ability to utilize the remaining assets.

The future realization of a portion of the reserved deferred tax assets related to tax benefits associated with the exercise of stock options, if and when realized, will not result in a tax benefit in the statement of income, but rather will result in an increase in additional paid-in capital. We will continue to re-assess its reserves on deferred income tax assets in future periods on a quarterly basis.

Stock-Based Compensation

We account for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”).  ASC 718 establishes accounting for stock-based awards exchanged for employee services.  Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period (generally the vesting period of the equity grant) using the straight-line method.

The fair value of the Company’s common stock options are estimated using the Black Scholes-Merton option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate; and the expected life.  We calculate the expected volatility using the historical volatility over the most recent period equal to the expected term and evaluates the extent to which available information indicate that future volatility may differ from historical volatility. The expected dividend rate is zero as the Company does not expect to pay or declare any cash dividends on common stock. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant.

We have not experienced significant exercise activity on stock options. We determine the expected term of its stock option awards issued using the simplified method.  The simplified method assumes each vesting tranche of the award has a term equal to the midpoint between when the award vests and when the award expires.

In accordance with ASC 718, excess tax benefits realized from the exercise of stock-based awards are classified in cash flows from financing activities.  The future realization of the reserved deferred tax assets related to these tax benefits associated with the exercise of stock options will result in a credit to additional paid-in capital if the related tax deduction reduces taxes payable.  We have elected the “with and without approach” regarding ordering of windfall tax benefits to determine whether the windfall tax benefit did reduce taxes payable in the current year.  Under this approach, the windfall tax benefit would be recognized in additional paid-in-capital only if an incremental tax benefit is realized after considering all other benefits presently available.

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Impairment of Long-Lived Assets

ASC 360, Plant, Property, and Equipment (“ASC 360”) requires management judgments regarding the future operating and disposition plans for marginally performing assets, and estimates of expected realizable values for assets to be sold.  We account for our long-lived assets in accordance with ASC 360 for purposes of determining and measuring impairment.  It is our policy to review the value assigned to the Company’s long lived assets, to determine if they have been permanently impaired by adverse conditions whenever events or circumstances indicate the related carrying amount may not be recoverable.  If required, an impairment charge would be recorded based on an estimate of future discounted cash flows.

In order to test for recoverability, we would compare the sum of an undiscounted cash flow projection from the related long-lived assets to the net carrying amount of such assets.  Considerable management judgment is necessary to estimate undiscounted future operating cash flows and fair values and, accordingly, actual results could vary significantly from such estimates.

Capitalization of Internally Developed Software

We are in the process of developing a next generation version of our accounts receivable platform. It is being designed for one of the Company’s clients and will be available to all order-to-cash process customers. According to ASC 350-40, Intangibles-Goodwill and Other-Internal-Use Software, we are able to capitalize the costs associated with the application development stage of a project. We will start amortizing capitalized costs when the software is ready for use and placed in service. The capitalized costs will be amortized on a straight-line basis over the estimated three year useful life of the software.

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RESULTS OF OPERATIONS

The following is a summary of our operating results for the years ended December 31, 2013 and 2012 (in thousands):

	2013		2012			Increase (Decrease)
Revenues:
Recurring	$	7,426	$	7,374		$	52		0.7	%
Non-recurring		1,555		1,440			115		8.0	%
Total revenues		8,981		8,814			167		1.9	%
Operating costs and expenses:
Operations, research and development		3,626		3,783			(157	)	(4.2	)%
Sales and marketing		2,360		2,365			(5	)	(0.2	)%
General and administrative		2,451		1,965			486		24.7	%
Amortization and depreciation		394		375			19		5.1	%
Total operating costs and expenses		8,831		8,488			343		4.0	%
Operating income		150		326			(176	)	(54.0	)%
Other income (expense)		18		(35	)		53		(151.4	)%
Income before provision for (benefit from) income taxes		168		291			(123	)	(42.3	)%
Provision for (benefit from) income taxes		4		(174	)		178		(102.3	)%
Net income	$	164	$	465		$	(301	)	(64.7	)%

Revenues

For the year ended December 31, 2013, revenue increased $167,000, or 1.9%, to $8,981,000 compared to $8,814,000 in 2012.  Recurring revenue increased $52,000, or 0.7%, to $7,426,000 in 2013 from $7,374,000 in 2012 primarily due to new customers that began utilizing our services during the past twelve months, partially offset by the termination by one of HP’s clients of its contract with HP pursuant to which the Company provided services to such client. Non-recurring revenue increased $115,000, or 8.0%, to $1,555,000 in 2013 from $1,440,000 in 2012. The increase is primarily due to startup engineering services from new customers and engineering services associated with the closing process of the HP client that terminated its contract with HP.

Operating Costs and Expenses

Costs of operations, research and development decreased by $157,000, or 4.2%, to $3,626,000 for the year ended December 31, 2013 compared to $3,783,000 in 2012.  These costs consist principally of salaries and related expenses for software development, programming, custom engineering, network services, and quality control and assurance.  Also included are costs for purchased services, network costs, costs of the production co-location facilities and other expenses directly related to our custom engineering and SaaS services. The decrease was primarily due to: (i) a reduction of third-party scanning costs related to two customers; (ii) a decrease in personnel recruitment fees; and (iii) a decrease in salaries due to the capitalization of a portion of salaries for employees working on internally developed software, partially offset by an increase in subcontractor usage.

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Sales and marketing costs were $2,360,000 for the year ended December 31, 2013, a decrease of $5,000, or 0.2%, compared to $2,365,000 in 2012.  This decrease resulted primarily from decreases in (i) marketing consultant fees; (ii) trade show expenses; and (iii) salaries and benefits, partially offset by commissions and recruiting fees.

General and administrative costs increased by $486,000, or 24.7%, to $2,451,000 for the year ended December 31, 2013, compared to $1,965,000 in 2012, primarily due to increases in (i) salaries related to new hires made over the past twelve months; (ii) insurance expense; (iii) travel and other investor relations expenses; (iv) consulting fees; (v) legal fees; and (vi) stock compensation expense.

Amortization and depreciation expense increased $19,000, or 5.1%, to $394,000 for the year ended December 31, 2013 compared to $375,000 in 2012, primarily due to new equipment purchases in the year ended December 31, 2013, partially offset by assets that became fully depreciated in 2013.

Operating Income

For the year ended December 31, 2013, we had operating income of $150,000, compared to operating income of $326,000 for the year ended December 31, 2012, a decrease of $176,000.  The decrease is attributable to an increase in operating expenses that exceeded the increase in revenue.

Other Income (Expense)

Other income, net for the year ended December 31, 2013, was $18,000 compared to other expense, net of $35,000 in 2012, an increase of $53,000. The increase is primarily due to the recovery of a previously written-off asset.

Net Income

For the year ended December 31, 2013, we had net income of $164,000 compared to net income of $465,000 for the year ended December 31, 2012, a decrease of $301,000.  The decrease in net income for 2013 compared to 2012 is primarily due to: (i) the decrease in operating income; and (ii) an increase in the provision for income taxes, partially offset by the increase in other income.

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Financial Condition and Liquidity

As of December 31, 2013, the Company had total stockholders’ equity of $3,914,000, working capital of $1,954,000 and an accumulated deficit of $111,741,000. The Company’s cash increased by $273,000 during the year ended December 31, 2013, to $1,371,000 on hand as of December 31, 2013.

Cash provided by operating activities for the year ended December 31, 2013 was $1,065,000, and consisted of: (i) net income of $164,000; (ii) non-cash charges for amortization and depreciation of $394,000; (iii) non-cash stock-based compensation expense of $189,000; (iv) an increase in accounts payable and accrued liabilities of $208,000; (v) a decrease in accounts receivable of $167,000; and (vi) a decrease in prepaid expenses of $9,000; partially offset by (i) a non-cash benefit related to deferred taxes of $18,000; (ii) a decrease in deferred revenue of $41,000; and (iii) a gain on the sales of property and equipment of $8,000.

Cash provided by operating activities for the year ended December 31, 2012 was $722,000, and consisted of: (i) net income of $465,000; (ii) non-cash charges for amortization and depreciation of $375,000; (iii) non-cash stock-based compensation expense of $163,000; (iv) an increase in accounts payable and accrued liabilities of $58,000; and (v) an increase in deferred revenue of $41,000; partially offset by (i) a non-cash benefit related to deferred taxes of $147,000; (ii) an increase in accounts receivable of $121,000; (iii) an increase in prepaid expenses of $104,000; and (iv) a non-cash benefit related to deferred rent of $8,000.

Cash used in investing activities was $546,000 and $70,000 for the years ended December 31, 2013 and 2012, respectively, due to expenditures for new equipment and capitalization of internally developed software.

Cash used in financing activities totaled $246,000 for the year ended December 31, 2013, reflecting payments on capital leases of $32,000 and long-term debt of $214,000. Cash used in financing activities totaled $241,000 for the year ended December 31, 2012, reflecting payments on capital leases of $178,000 and long-term debt of $63,000.

As a result of these operating, investing and financing activities, cash increased by $273,000 to $1,371,000 at December 31, 2013, compared to a cash increase of $411,000 to $1,098,000 at December 31, 2012.

The Company’s primary source of liquidity is cash generated from operations.  We believe that our current cash balance along with cash generated from operations, will meet our liquidity needs for the next twelve months.  No assurances can be given, however, that this will be the case.  Should we require more liquidity than our current cash balances and cash generated from operations will provide, we believe we could obtain additional liquidity through debt or equity financing.

Net Operating Loss Carry Forwards

At December 31, 2013, the Company had federal and state net operating loss carry-forwards (“NOLs”) remaining of approximately $26 million and $20 million, respectively, which may be available to reduce federal and state taxable income, if any.  These NOLs will expire through 2033.  However, Internal Revenue Code Section 382 rules limit the utilization of NOLs upon an ownership change of a company.  During 2013, we performed an evaluation as to whether an ownership change had taken place.  We believe that there has been no ownership change as such applies to Section 382.  If it is determined that an ownership change has taken place, utilization of the NOLs will be subject to limitations in future periods, which could eliminate a substantial portion of the future income tax benefits of the NOLs.

During 2013, the Company reviewed previous positive and negative evidence and also reviewed its expected taxable income for future periods and concluded it is more likely than not that approximately $1,192,000 of tax benefits relating to NOLs will be utilized.  Accordingly, the company recorded a tax benefit in the amount of $18,000 during the year ended December 31, 2013.

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Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements are included beginning on page F-1.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). The term disclosure controls and procedures means controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.  Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2013, our disclosure controls and procedures were effective.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act.  Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, and effected by the Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”) including those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have assessed the effectiveness of our internal control over financial reporting as of December 31, 2013.  In making this assessment, our management used the criteria described in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 1992.  Based on this assessment and those criteria, our management concluded that the Company did maintain effective internal control over financial reporting as of December 31, 2013.  During 2013, COSO released an updated version of its Internal Control --- Integrated Framework, which should be implemented by no later than December 15, 2014.  It is management’s intention to implement the 2013 Framework on a timely basis.

Changes in Internal Control Over Financial Reporting

There were no changes in internal controls during the quarter ended December 31, 2013 that have materially affected or are reasonably likely to materially affect the Company’s internal controls over financial reporting.

Item 9B. OTHER INFORMATION

None.

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PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

As of March 15, 2014, the names, ages and positions of the directors, executive officers and key employees of the Company are as follows:

			Director
Name	Age	Position	Since
Philip Summe	44	Chairman of the Board	2011
James A. Cannavino(3)	69	Director	2000
Paul Lisiak(1)(2)(3)	40	Director	2012
Thomas C. Lund(2)(3)	70	Director	2011
John J. Murabito(1)(3)	58	Director	2011
Matthew E. Oakes	51	President, Chief Executive Officer and Director	2011
Craig W. Thomas(1)(2)	39	Director	2011
Lowell Rush	57	Chief Financial Officer, Secretary and Treasurer

(1) Member of the Audit Committee

(2) Member of the Compensation Committee

(3) Member of the Governance and Nominating Committee

Philip Summe has been our Chairman of the Board since May 2012 and a director since May 2011.  Mr. Summe is a Partner and co-founder of Baylight Capital, a small and mid-cap focused investment firm. From 2005 to 2012 Mr. Summe was Portfolio Manager of Crossfields Capital Management, a firm he founded which invested in small-cap, deep-value companies.  From 2002 to 2004, Mr. Summe was a General Partner for Gabriel Venture Partners, a venture capital fund focused on leading investments in technology companies.  From 1998 to 2001, Mr. Summe was a Principal with J.P. Morgan Partners (formerly Chase Capital Partners) and Flatiron Partners where he led the software initiatives and served on numerous boards.  From 1996 to 1998, Mr. Summe was an investment banker with Deutsche Morgan Grenfell’s technology investment banking group where he provided financing and M&A advice to companies.  Mr. Summe was a Senior Consultant with Accenture from 1991 to 1994, and worked for Convergys Systems from 1989 to 1991.  Mr. Summe received an MBA with Honors from the University of Chicago Graduate School of Business and a BS in Applied Physics with Honors from Xavier University.

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James A. Cannavino has been a director since March 2000, served as Chairman of the Board from March 2000 to May 2011, and served as Chief Executive Officer from December 2002 to May 2011.  From September 1997 to April 2000 he was the non-executive Chairman of Softworks, Inc. (a then wholly owned subsidiary of the Company), which went public and was later sold to EMC.  Mr. Cannavino was also the Chief Executive Officer and Chairman of the Board of Directors of CyberSafe, Inc., a corporation specializing in network security, from April 1998 to July 2001.  In August 1995, he was appointed as President and Chief Operating Officer of Perot Systems Corporation and in 1996 was elected to serve as Chief Executive Officer through July 1997. Prior to that, he served as a Senior Vice President at IBM, responsible for strategy and development.  Mr. Cannavino held various positions at IBM for over thirty years beginning in 1963. He also served on the IBM Corporate Executive Committee and Worldwide Management Council, and on the Board of IBM’s integrated services and solutions company.  Mr. Cannavino presently serves on the Boards of 1-800 Flowers, Facilities Maintenance, and the National Center for Missing and Exploited Children and is the Chairman of the Board of the International Center for Missing and Exploited Children.  He recently was the Chairman of the Board of Marist College in Poughkeepsie, New York and continues to serve on the Board.  Mr. Cannavino brings to our Board knowledge and experience regarding our history and operations and, generally, the computer software industry, finance and capital markets.

Paul Lisiak is a Managing Director of Metropolitan Venture Partners, a venture capital firm he co-founded in 1999.  In his role, Mr. Lisiak negotiates and manages investments, as well as oversees the financial and operational management of the firm.  Mr. Lisiak is also the Managing Partner of Metropolitan Equity Partners, which employs a special situation investment strategy with a particular focus on financial services. Prior thereto, he was a member of the Global High Yield team at Lazard Asset Management.  Mr. Lisiak received a BA in Economics from the University of Pennsylvania.  He currently serves as a board member of Capital Payments and Creditmax Holdings and is the chairman of Reed Energy.  Mr. Lisiak brings to our Board experience in finance and management oversight, as well as the perspective of the Company’s largest outside stockholder, whom he represents.

Thomas C. Lund has been a director since May 2011 and is the founder and Chief Executive Officer of Lund Capital Group, a private commercial real estate company that has holdings in various regions across the U.S.  Prior to founding Lund Capital Group in 2000, Mr. Lund, in 1981, founded Customer Development Corporation (CDC), a company specializing in database management and marketing for financial institutions and other various companies around the world and that he sold in 1998.  Mr. Lund is widely known as a pioneer of database marketing.  In 1987, CDC was honored by Inc. Magazine as the 8th fastest growing privately held company in the country.  Mr. Lund, who is credited worldwide with many technical and creative innovations in the database marketing industry, also received the coveted “High-Tech Entrepreneur of the Year” award by Entrepreneur Magazine.  In addition to Mr. Lund’s business interests, he and his wife are active philanthropists. Mr. Lund brings to the Board extensive experience in marketing and business growth, which is especially important as the Company seeks to expand its customer base.

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John J. Murabito has been a director since May 2011 and served as Chairman of the Board from May 2011 to May 2012.  From November 2001 through February 2011, Mr. Murabito was Chief Executive Officer of Hapoalim Securities USA, Inc. and its predecessor companies, including Investec (US) Inc., an affiliate of the Investec Group, an international banking group.  In his role as CEO of Investec (US) Inc., Mr. Murabito oversaw a firm with approximately 1,000 employees and $1 billion of assets.  Mr. Murabito successfully restructured the company’s US operations, including the acquisition and disposition of businesses, to enhance stockholder value.  Mr. Murabito was a Managing Director in Information Technology at the National Securities Clearing Corporation and served as deputy CIO for this essential US securities industry clearing utility.  Previously, Mr. Murabito was a general partner in the investment advisor Weiss Peck & Greer responsible for information technology and portfolio administration.  Mr. Murabito spent ten years with the investment bank Dillon Read & Company, including as Chief Information Officer.  Mr. Murabito earned an MBA from the Wharton School at the University of Pennsylvania.  Mr. Murabito’s nearly thirty years of experience with investment banking and operations bring to the Board strong and effective knowledge of corporate governance, executive management and finance.

Matthew E. Oakes was appointed to the position of Chief Executive Officer on May 25, 2011and has served as President since March 2009.  He previously held the position of Executive Vice President and Chief Operating Officer from August 2006, and Executive Vice President – Client Services since November of 2002.  Prior to his joining the Company, Mr. Oakes served for three years as the Chief Operating Officer for Direct Media Networks a New York based e-commerce and technology company.  He held executive positions in Westinghouse Communities Inc. including Managing Director of Operations.  Mr. Oakes received a Juris Doctorate of Law from Nova Southeastern University and a Bachelor’s Degree in Business from Cornell University.  Prior to attending Cornell University, he served with the United States Marine Corps in the Special Operations Group of the 3rd Marine Division and as a Marine Drill Instructor at the Marine Corp Recruit Depot, Paris Island, South Carolina.  As President and Chief Executive Officer, Mr. Oakes brings to the Board an intimate knowledge of the Company’s business and a management perspective. Mr. Oakes has shaped the corporate vision of Direct Insite and is focused on driving strategic business growth for the Company. He leads the organization in the development and execution of all business processes and operations, and drives constant improvement initiatives to ensure complete client satisfaction.

Craig W. Thomas has been a director since May 2011 and is a co-founder of Shareholder Advocates for Value Enhancement (S.A.V.E.) and a Managing Member of S.A.V.E. Partners III, LLC and S.A.V.E. Partners IV, LLC.   Mr. Thomas served as Director of Research at S.A.C. Capital Advisors from 2007 to 2008 and was a Portfolio Manager at S.A.C. Capital Advisors from 2005 to 2007.  Mr. Thomas was a Director at CR Intrinsic Investors, an affiliate of S.A.C. Capital Advisors, from 2004 to 2005, and he was a Research Analyst at S.A.C. Capital Advisors from 2003 to 2004.  Prior to earning his MBA, Mr. Thomas was an Analyst at Goff Moore Strategic Partners and Rainwater, Inc. from 1999 to 2001 and an Associate at The Boston Consulting Group, Inc. from 1997 to 1999.  Mr. Thomas is a former director of Laureate Education, Inc. Mr. Thomas earned his A.B. at Stanford University and earned his MBA from the Graduate School of Business at Stanford University.  Mr. Thomas brings to the Board valuable experience in investment management, public company oversight and stockholder advocacy.

Executive Officers

Lowell Rush joined Direct Insite, as acting Chief Financial Officer in October 2013, and was appointed its Chief Financial Officer, Secretary and Treasurer in December 2013.   Prior to joining the Company, Mr. Rush held positions as Chief Operating Officer of Cosmetic Dermatology, Inc. from 2011 to 2013, Vice President / Chief Financial Officer of Bijoux Terner from 2008 to 2010, and Chief Financial Officer of Little Switzerland, Inc. from 2006 to 2008, in addition to various financial management roles at Sunglass Hut International, Burger King Corp. and Knight-Ridder.  He began his career with Big 4 firms Ernst & Young and Deloitte & Touche. Mr. Rush is a Certified Public Accountant with a Bachelor of Science degree in Accounting from the State University of New York at Buffalo, and holds an Executive Masters of Business Administration degree in International Business from the University of Miami. Mr. Rush has 35+ years of experience, primarily in financial management and operational development. He is experienced in strategic planning and implementation, SEC compliance and reporting, cost reduction and avoidance, and corporate development. He plays a key role in leading Direct Insite's financial organization as the company continues to execute upon its growth strategy and explore new strategic opportunities.

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Term of Office and Family Relationships

All directors hold office until the next annual meeting of shareholders or until their respective successors are elected or until their earlier death, resignation or removal.  Executive officers are appointed by and serve at the discretion of our Board of Directors.  There are no family relationships between any of our directors or executive officers.

Section 16(a) Beneficial Ownership Reporting Compliance

Pursuant to Section 16(a) of the Exchange Act and the rules thereunder, the Company’s executive officers and directors and persons who own more than 10% of a registered class of the Company’s equity securities are required to file with the SEC reports of their ownership of, and transactions in, the Company's common stock.  The Company has determined that, during the fiscal year ended December 31, 2013, each of the Company’s non-management directors inadvertently failed to file a Form 4 to report one annual grant of restricted stock as compensation for services as a director of the Company.  All of these filings have now been made.

Code of Ethics

Direct Insite adopted a Corporate Code of Business Ethics in 2004 that applies to all employees, officers and directors.  It is broad in scope and is intended to foster honest and ethical conduct, including accurate financial reporting, compliance with laws and the like.  In addition, in 2005 the Company adopted an additional “Code of Ethics – Chief Executive and Chief Financial Officers” to comply with the Sarbanes-Oxley Act and the regulations of the SEC.  This code is posted on our internet website at http://www.directinsite.com/code-of-ethics/.

Audit Committee and Audit Committee Financial Expert

The Board has a standing Audit Committee.  The Board has determined that each Director who serves on the Audit Committee is independent, as that term is defined by NASDAQ Listing Rule 5605(a)(2).  From January 1, 2013 to December 31, 2013, the Audit Committee consisted of Paul Lisiak, Craig Thomas, and John Murabito.  The Board has determined that Messrs. Murabito, who currently serves as Chairman of the Audit Committee, Lisiak and Thomas each qualify as an Audit Committee financial expert, as that term is defined in applicable regulations of the SEC.

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Item 11. EXECUTIVE COMPENSATION

The following table sets forth the annual and long-term compensation with respect to the Principal Executive Officer (“PEO”) and each of the Company’s other two most highly compensated executive officers of the Company who were serving as of December 31, 2013.

Summary Compensation Table
								All
								Other
						Options		Compen-
		Salary		Bonus		Awards		sation		TOTAL
Name	Years	($)		($)		($)(1)		($)(2)		($)
Matthew E. Oakes President, Chief Executive Officer, (PEO)(3)	2013	$	275,000	$	50,000	$	–	$	28,750	$	353,750
	2012	$	275,000	$	42,020	$	223,200	$	27,000	$	567,220
Arnold Leap EVP Channel Sales, Chief Technology Officer	2013	$	191,667	$	12,500	$	51,500	$	96,979	$	352,646
	2012	$	200,000	$	16,000	$	8,550	$	38,833	$	263,383
Lowell Rush Chief Financial Officer(4)	2013	$	7,708	$	5,000	$	51,200	$	36,720	$	100,628
	2012	$	–	$	–	$	–	$	–	$	–
Jeff Yesner Former Chief Financial Officer(5)	2013	$	152,083	$	15,000	$	25,750	$	–	$	192,833
	2012	$	7,708	$	–	$	26,800	$	–	$	34,508

1. This represents the fair value of the award as of the grant date in accordance with FASB ASC Topic 718.  See assumptions used in determining the fair value in Note 6 to the financial statements.

2. All other compensation includes the following for each of the executives:

- Mr. Oakes: In 2013, the amount was for a corporate apartment valued at $28,750.  In 2012, the amount was for a corporate apartment valued at $27,000.

- Mr. Leap: In 2013, the amount was for commissions of $96,979.  In 2012, the amount was for commissions of $29,233 and a car allowance including insurance of $9,600.

- Mr. Rush:  This amount includes $36,720 in consulting fees received by Mr. Rush for compensation for his services as Acting Chief Financial Officer of the Company for the period October 4, 2013 through December 19, 2013, when Mr. Rush was appointed Chief Financial Officer of the Company.

3. Mr. Oakes was appointed Chief Executive Officer on May 25, 2011 and President on March 18, 2009.  Mr. Oakes does not receive compensation for his service as a Director of the Company.

4. Mr. Rush was appointed Chief Financial Officer, Secretary and Treasurer on December 19, 2013.

5. Mr. Yesner was appointed Chief Financial Officer, Secretary and Treasurer on December 17, 2012, and resigned on October 15, 2013.  All of the options awarded to Mr. Yesner were forfeited in 2013.

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Employment Agreements

On May 29, 2013, the Company entered into an Employment Agreement (the “Employment Agreement”), with Matthew E. Oakes, the Company’s President and Chief Executive Officer.  The Employment Agreement supersedes Mr. Oakes’ previous employment agreement with the Company and extends Mr. Oakes’ term as President and Chief Executive Officer of the Company to December 31, 2015.The agreement provides for a base salary of $24,583 per month, annual incentive bonuses based on the Company’s performance in achieving prescribed revenue and EBIT targets, and discretionary bonuses.  The agreement also provides for reimbursement of all out-of-pocket expenses reasonably incurred by him in the performance of his duties thereunder and certain severance benefits in the event of termination prior to the expiration date.  If Mr. Oakes is terminated without cause or resigns from employment for “good reason” (as defined within Mr. Oakes’ employment agreement), he would receive one-year of base salary and COBRA coverage at our expense for the number of months he receives severance payments.

On April 5, 2012, the Compensation Committee of the Board of Directors agreed that the Company would continue to make lease payments on the corporate apartment located in Ft. Lauderdale, Florida and utilized by Mr. Oakes, through the date of termination of such lease, which was extended to May 2014, in lieu of the Company’s reimbursement of up to $25,000 of relocation expenses as originally provided in the Agreement.

Outstanding Equity Awards at Fiscal Year End

The following table provides information concerning outstanding options, unvested stock and equity incentive plan awards for the named executives as of December 31, 2013:

	Option Awards
Name	Number of Securities Underlying Unexercised Options - Exercisable			Number of Securities Underlying Unexercised Options - Unexercisable			Equity Incentive Plan Awards: Number of Underlying Unexercised Unearned Options		Option Exercise Price		Option Expiration Date
Matthew E. Oakes		30,000	(1)		180,000	(2)		--	$	1.15	01/01/2017
Arnold Leap		5,625	(1)		--			--	$	1.15	03/13/2014
Lowell Rush		-			80,000	(3)		--	$	1.50	12/19/2018

(1) These options were vested as of December 31, 2013.

(2) 7,500 vest each month from February 1, 2014 through January 1, 2016.

(3) These options vest over a four-year period: (i) 20,000 vesting on December 19, 2014, and (ii) 1,667 vesting each month over 36 months beginning on January 19, 2015.

Equity Compensation Plan Information

We maintain various stock plans under which options vest and shares are awarded at the discretion of our Board of Directors or its Compensation Committee.  The purchase price of the shares under the plans and the shares subject to each option granted is not less than the fair market value on the date of the grant.  The term of each option is generally five years and is determined at the time of the grant by our Board of Directors or the Compensation Committee.  The participants in these plans are officers, directors, employees and consultants of the Company and its affiliates.

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The Company has two plans under which stock options are currently outstanding: the 2003-A Stock Option/Stock Issuance Plan and the 2004 Stock Option/Stock Issuance Plan.  Additional options may be granted under the 2004 Stock Option/Stock Issuance Plan through August 20, 2014.  The terms of each of the plans are substantially the same.

Options granted under each plan may be incentive stock options qualified under Section 422 of the Internal Revenue Code or non-qualified stock options.  Under the terms of the plan, the exercise price of options granted under the plan will be the fair market value at the date of the grant.  Prices for incentive stock options granted to employees who own 10% or more of our stock are at least 110% of the market value at the date of the grant.  The nature and terms of the options to be granted are determined at the date of the grant by the Compensation Committee of the Board of Directors.  Stock options granted under the plans may become exercisable in one or more installments in the manner and at the time or times specified by the committee.  Options granted under the plans expire not later than five years from the date of grant.

The following table summarizes certain information concerning each of the plans.

Plan	Expiration	Original Number of Shares		Options Granted, Net of Forfeitures During 2013		Options Outstanding at December 31, 2013		Shares Available for Grant at December 31, 2013
2003-A Plan	April 1, 2013		975,000		—		330,000		—
2004 Plan	August 20, 2014		1,200,000		270,909		470,034		12,894

Directors Compensation

Effective May 25, 2011, the compensation of the Directors, other than the Chairman of the Board, includes an annual fee of $10,000 payable in cash.  In lieu of cash, a Director may elect to receive stock, distributed quarterly in arrears, with the number of shares distributed each quarter determined by dividing $2,500 by the average closing price in the last five trading days of each respective quarter.  At the beginning of each calendar year, Directors additionally receive $10,000 in restricted stock vesting daily over two years, with the number of shares equal to $10,000 divided by the average closing price of the stock in the five prior trading days to year-end.  Committee members each receive an additional annual fee of $7,500 distributed quarterly in arrears, which may be paid in cash or, at the Director’s election, stock, with the number of shares distributed each quarter determined by dividing $1,875 by the average closing price in the last five trading days of each respective quarter.  Committee chairs are paid $12,500 annually for their Committee work.  The Chairman of the Board receives total annual fees of $30,000 payable in cash, or stock at his election, and $30,000 in restricted stock, under the same terms as the annual fees and stock grants as the other Directors above.

In January 2008, the Company adopted a Deferred Compensation Plan for Directors whereby the Directors may elect to defer their compensation to a date following the termination of their service as a director.  The Company also reimburses Directors for reasonable expenses incurred in attending Board and Committee meetings.

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The following table provides the compensation earned by our non-employee Directors for the year ended December 31, 2013.

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Nonqualified Deferred Compensation Earnings ($)		Total ($)
Philip Summe (1)		--	$	30,000	$	30,000	$	60,000
James A. Cannavino (2)		--	$	10,000	$	18,000	$	28,000
Paul Lisiak (3)		--	$	10,000	$	38,000	$	48,000
Thomas C. Lund (4)		--	$	10,000	$	25,000	$	35,000
John J. Murabito (5)		--	$	10,000	$	30,000	$	40,000
Craig W. Thomas (6)	$	30,000	$	10,000		--	$	40,000

Footnotes

(1) Mr. Summe was a Director, Chairman of the Governance and Nominating Committee and member of the Audit Committee from May 25, 2011 to May 21, 2012.  Mr. Summe has been the Chairman of the Board of Directors since May 21, 2012.  As of December 31, 2013, Mr. Summe had 158,059 shares of deferred and non-issued stock.

(2) Mr. Cannavino has been a Director since 2000 and a member of Governance and Nominating Committee from May 25, 2011 through December 31, 2013.  As of December 31, 2013, Mr. Cannavino had 132,405 shares of deferred and non-issued stock.

(3) Mr. Lisiak has been a Director, member of the Audit Committee, Compensation Committee, and Chairman of the Governance and Nominating Committee since May 21, 2012.  As of December 31, 2013, Mr. Lisiak had 84,105 shares of deferred and non-issued stock.

(4) Mr. Lund was a Director and member of the Compensation Committee since May 25, 2011.  Mr. Lund has been a member of the Audit Committee from January 1, 2013 to December 31, 2013.  As of December 31, 2013, Mr. Lund had 97,242 shares of deferred and non-issued stock.

(5) Mr. Murabito has been a Director and member of the Governance and Nominating Committee since May 25, 2011.  Mr. Murabito has been Chairman of the Audit Committee since May 21, 2012.  As of December 31, 2013, Mr. Murabito had 143,735 shares of deferred and non-issued stock.

(6) Mr. Thomas has been a Director, Chairman of the Compensation Committee and member of the Audit Committee since May 25, 2011.  As of December 31, 2013, Mr. Thomas had 32,393 shares of deferred and non-issued stock.

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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth the beneficial ownership of shares of voting stock of the Company, as of March 15, 2014, (i) each person known by the Company to beneficially own more than 5% of the shares of outstanding common stock, based solely on filings with the SEC, (ii) each of the Company’s executive officers and directors and (iii) all of the Company’s executive officers and directors as a group.  Except as otherwise indicated, all shares are beneficially owned, and the persons named as owners hold investment and voting power:

Name of Beneficial Owner (1)	Amount of Common Stock Beneficially Owned		Rights to Acquire Beneficial Ownership Through Exercise of Options and Warrants Within 60 Days		Total Beneficially Owned as % of Outstanding Shares (2)
Metropolitan Venture Partners II, L.P. (3)		1,568,492		–		12.3	%
S.A.V.E. Partners III LLC (4)		803,048		–		6.3	%
James Cannavino (5)		2,478,193		1,705		19.4	%
John J. Murabito (6)		284,561		1,705		2.3	%
Paul Lisiak (7)		1,653,423		1,705		12.9	%
Thomas C. Lund (8)		751,801		1,705		5.9	%
Philip Summe (9)		175,538		5,115		1.4	%
Craig W. Thomas (10)		836,267		1,705		6.5	%
Matthew Oakes		404,993		52,500		3.6	%
Lowell M. Rush		-		–		*
All Officers and Directors as a Group (8 persons)		6,584,778		66,138		52.1	%
* = Less than 1%

Footnotes

(1) Unless otherwise indicated, the address of all Beneficial Owners is c/o Direct Insite, Inc., 500 East Broward Boulevard, Suite 1550, Fort Lauderdale, FL 33394.

(2) Based upon 12,797,099 shares of common stock outstanding as of March 15, 2014, plus outstanding options, warrants, deferred stock and restricted stock grants that are exercisable within 60 days of the date of the table.

(3) The address of Metropolitan Venture Partners II, L.P. is 590 Madison Avenue, 34^th Floor, New York, NY 10022.  Amount includes 45,395 shares of common stock owned directly by Metropolitan Venture Partners Corp.

(4) The address of S.A.V.E. Partners III LLC is 535 Fifth Avenue, 30^th Floor, New York, NY 10017.

(5) Includes 133,231 shares of restricted stock that have fully vested but not been issued and 1,705 shares of restricted stock that are expected to vest within 60 days.

(6) Includes 144,561 shares of restricted stock that have fully vested but not been issued and 1,705 shares of restricted stock that are expected to vest within 60 days.

(7) Includes 1,568,492 shares of common stock held by Metropolitan Venture Partners II, L.P., 84,931 shares of restricted stock that have fully vested but not been issued and 1,705 shares of restricted stock that are expected to vest within 60 days.  Mr. Lisiak serves as Managing Partner of Metropolitan Equity Partners, LLC, the manager of the general partner of Metropolitan Venture Partners II, L.P.  Does not include the 299,576 shares of common stock held by Metropolitan Venture Partners, L.P. of which Mr. Lisiak is a limited partner. In addition, Mr. Lisiak is one the members of the board of directors of the general partner of Metropolitan Venture Partners, L.P.

(8) Includes 98,068 shares of restricted stock that have fully vested but not been issued, and 1,705 shares of restricted stock that are expected to vest within 60 days.

(9) Includes 160,538 shares of restricted stock that have fully vested but not been issued, and 5,115 shares of restricted stock that are expected to vest within 60 days.

(10) Includes 803,048 shares of common stock held by S.A.V.E Partners III LLC, of which Mr. Thomas is Managing Director, 28,900 shares of restricted stock that have fully vested but not been issued, and 1,705 shares of restricted stock that are expected to vest within 60 days.

27

The following table sets forth certain information as of December 31, 2013, for all compensation plans (a description of which can be found under Item 10 of this report), including individual compensation arrangements under which equity securities of the Company are authorized for issuance.

Securities Authorized for Issuance Under Equity Compensation Plans

	Number of Securities to be Issued Upon Exercise of Outstanding		Weighted Average Exercise Price Per Share of Outstanding		Number of Securities Available for Future Issuance Under Equity Compensation
	Options		Options		Plans
Equity compensation plans approved by security holders		800,034	$	1.31		12,894

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Director Independence

The Board has affirmatively determined that each Director other than Mr. Oakes, is independent under the independence standards set forth in NASDAQ Listing Rule 5605(a)(2).  The Board has standing Audit, Compensation, and Governance and Nominating Committees, each of whose members is also independent under the independence standards set forth in NASDAQ Listing Rule 5605(a)(2).

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following is a summary of the aggregate fees for professional services rendered to us by Marcum LLP, our independent auditors, for the fiscal years ended December 31, 2013 and 2012:

	2013		2012
Audit Fees (1)	$	130,000	$	130,000
Audit Related Fees		–		–
Tax Fees (2)		12,000		12,000
All Other Fees		–		–

(1) Audit Fees in 2013 and 2012 consisted of aggregate fees billed and to be billed for professional services rendered for the audit of our annual financial statements, review of the interim financial statements included in quarterly reports, and consents issued in connection with registration statements or services that are normally provided by the independent auditors in connection with statutory and regulatory filings or engagements.

(2) Tax Fees in 2013 and 2012 consisted of the aggregate fees billed for professional services rendered for tax compliance, tax advice, and tax planning, including fees related to the preparation of federal and state income tax returns.

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The Audit Committee has responsibility for the appointment, compensation and oversight of the work of the independent auditor. As part of this responsibility, the Audit Committee must pre-approve all permissible services to be performed by the independent auditor.

The Audit Committee has adopted an auditor pre-approval policy which sets forth the procedures and conditions pursuant to which pre-approval may be given for services performed by the independent auditor. Under the policy, the Audit Committee must give prior approval for any amount or type of service within four categories: audit, audit-related, tax services or, to the extent permitted by law, other services that the independent auditor provides. Prior to the annual engagement, the Audit Committee may grant general pre-approval for independent auditor services within these four categories at maximum pre-approved fee levels. During the year, circumstances may arise when it may become necessary to engage the independent auditor for additional services not contemplated in the original pre-approval and, in those instances, such service will require separate pre-approval by the Audit Committee if it is to be provided by the independent auditor. For any pre-approval, the Audit Committee will consider whether such services are consistent with the SEC’s rules on auditor independence, whether the auditor is best positioned to provide the most cost effective and efficient service and whether the service might enhance the Company’s ability to manage or control risk or improve audit quality. The Audit Committee may delegate to one or more of its members authority to approve a request for pre-approval provided the member reports any approval so given to the Audit Committee at its next scheduled meeting.

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PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

1. The financial statements listed in the index to the Financial Statements.

None.

2. Exhibits:

Exhibit Number	Description
3.1   (a)	Certificate of Incorporation, as amended. (Incorporated by reference to Exhibit 3(a) of Form S‑1 Registration Statement). (1)
(b)	Certificate of Amendment (Change in Name) (Incorporated by reference to Exhibit 3(a) of Form S‑1 Registration Statement). (1)
(c)	Certificate of Amendment (Change in Name) (Incorporated by reference to Exhibit 3(a) of Form S‑1 Registration Statement). (1)
(d)	Certificate of Amendment (Authorizing Increase in Shares of Common Stock) (Incorporated by reference to Exhibit 3 (i) (d) to Form 10-K for the year ended 1995).
(e)	Certificate of Amendment (Authorizing one for ten reverse-stock split as of March 30, 1998) (Incorporated by reference to Form S-1 Registration Statement). (1)
(f)	Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock filed October 3, 2002 (Incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K dated October 17, 2002).
(g)	Certificate of Amendment of Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock filed December 20, 2002 (Incorporated by reference to Exhibit 3.2 of Company's Current Report on Form 8-K filed January 7, 2003).
(h)	Certificate of Amendment of Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock filed January 2, 2003 (Incorporated by reference to Exhibit 3.3 to the Company's Current Report on Form 8-K filed January 17, 2003).
(i)	Certificate of Designation, Preferences and Rights of Series B Redeemable Preferred Stock filed December 10, 2003 (Incorporated by reference to Exhibit 3(i) to the Company’s Annual Report on Form 10-KSB filed April 14, 2004).
(j)	Certificate of Designation, Preferences and Rights of Series C redeemable Preferred Stock filed December 16, 2003 (Incorporated by reference to Exhibit 3(j) to the Company’s Annual Report on Form 10-KSB filed April 14, 2004).
(k)	Certificate of Amendment of Certificate of Designation, Preferences and Rights of Series C Preferred Stock filed March 29, 2005.
3.2	By‑Laws. (Incorporated by reference to Exhibit 3(d) to the Company’s Form S‑1 Registration Statement). (1)
4.1	Form of Common Stock Certificate. (Incorporated by reference to Exhibit 4 to the Company’s Form S‑1 Registration Statement). (1)
4.2	Securities Purchase Agreement between the Company, Sigma Opportunity Fund, LLC and Metropolitan Venture Partners II, LP (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed March 31, 2005).

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Exhibit Number	Description
10.1	2003 Stock Option /Stock Issuance Plan (Incorporated by reference to Exhibit 10.8 to the Company’s Form 10-K filed on April 15, 2003).
10.2	2003A Stock Option /Stock Issuance Plan (Incorporated by reference to the Company’s Definitive Proxy Statement on Schedule 14A filed May 6, 2003).
10.3	2004 Stock Option /Stock Issuance Plan (Incorporated by reference to the Company’s Definitive Proxy Statement on Schedule 14A filed November 20, 2006).
10.4	2008 Directors’ Deferred Compensation Plan (Incorporated by reference to Exhibit 10.4 to the Company’s Form 10-K filed on March 26, 2013).
10.5	Stock Purchase and Registration Rights Agreement between the Company and Metropolitan Venture Partners II, L.P. dated as of September 25, 2002 (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated September 25, 2002).
10.6	Stock Purchase and Registration Rights Agreement between the Company and Metropolitan Venture Partners II, L.P. dated as of December 24, 2002 (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated December 24, 2002).
10.7	Amendment letter dated January 29, 2004 to the Statement of Work between IBM Corporation and the Company, portions of the Exhibit have been omitted pursuant to a request for confidential treatment. (Incorporated by reference to Exhibit 10.28 to the Company’s S-1 registration statement filed on February 19, 2009).
10.8	Worldwide Invoices On-Line (IOL) Appendix A Payments and Fees for Ongoing Support (OCS)-Invoice Processing, Archiving, and Attachment Processing and Non-Recurring Engineering (NRE) between International Business Machines Corporation and the Company dated December 1, 2008; portions of the Exhibit have been omitted pursuant to a request for confidential treatment. (Incorporated by reference to Exhibit 10.29 to the Company’s S-1 registration statement filed on February 19, 2009).
10.9	Master Services Agreement #EDS-2004-01-2005 dated May 7, 2004 between Electronic Data Systems Corporation and the Company, portions of the Exhibit have been omitted pursuant to a request for confidential treatment. (Incorporated by reference to Exhibit 10.30 to the Company’s S-1 registration statement filed on February 19, 2009).
10.10	Statement of Work #EDS-2007-05-01 dated May 8, 2007 between Electronic Data Systems Corporation and the Company, portions of the Exhibit have been omitted pursuant to a request for confidential treatment. (Incorporated by reference to Exhibit 10.31 to the Company’s S-1 registration statement filed on February 19, 2009).
10.11	Master Services Agreement EIAP (OGS) Amendment (#8) dated June 27, 2007 between Electronic Data Systems Corporation and the Company, portions of the Exhibit have been omitted pursuant to a request for confidential treatment. (Incorporated by reference to Exhibit 10.32 to the Company’s S-1 registration statement filed on February 19, 2009).

31

Exhibit Number	Description
10.12	Statement of Work #EDS-2008-05-07 dated May 7, 2008 between Electronic Data Systems Corporation and the Company, portions of the Exhibit have been omitted pursuant to a request for confidential treatment. (Incorporated by reference to Exhibit 10.33 to the Company’s S-1 filed registration statement filed on February 19, 2009).
10.13	Master Services Agreement MIAP (OGS) Amendment (#10) dated August 21, 2008 between Electronic Data Systems Corporation and the Company, portions of the Exhibit have been omitted pursuant to a request for confidential treatment. (Incorporated by reference to Exhibit 10.34 to the Company’s S-1 registration statement filed on February 19, 2009).
10.14	Agreement dated as of April 28, 2011 by and among Metropolitan Venture Partners II, L.P., Metropolitan Venture Partners (Advisors), L.P., Metropolitan Venture Partners Corp., Michael Levin, Tall Oaks Group LLC, Lawrence D. Hite, Thomas C. Lund, Carol A. Lund, Craig W. Thomas, Bradley M. Tirpak, John J. Murabito, Philip Summe and S.A.V.E. Partners III, LLC, James A. Cannavino and the Company, (Incorporated by reference to Exhibit 10 to the Company’s Form 8-K filed on April 29, 2011).
10.15	Employment Agreement Amendment 1 between the Company and Matthew E. Oakes, dated August 16, 2011 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed on November 14, 2011).
10.16	Employment Agreement effective January 1, 2012 between the Company and Matthew E. Oakes (Incorporated by reference to the Company’s Current Report on Form 8-K filed January 19, 2012).
10.17	Employment Agreement effective May 29, 2013 between the Company and Matthew E. Oakes (Incorporated by reference to the Company’s Current Report on Form 8-K filed May 30, 2013).
10.18	Office Lease Agreement between the Company and CTA Partners, L.P., dated October 24, 2012 (Incorporated by reference to Exhibit 10.17 to the Company’s Form 10-K filed on March 26, 2013).
10.19	Agreement, dated October 28, 2013, by and between the Company and International Business Machines Corporation (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 20, 2013).
23.1	Consent of Marcum, LLP.
31.1	Certification pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer.
31.2	Certification pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer.

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Exhibit Number

Description

101

Financial Statements from the Annual Report on Form 10-K of the Company for the year ended December 31, 2013, formatted in Extensible Business Reporting Language (XBRL): (i) Balance Sheets as of December 31, 2013 and 2012; (ii) Statements of Operations for the years ended December 31, 2013 and 2012; (iii) Statements of Stockholders’ Equity for the years ended December 31, 2013 and 2012; and (iv) Statements of Cash Flows for the years ended December 31, 2013 and 2012.*

Footnotes

(1) Filed with Form S‑1, Registration Statement of the Company Reg. No 3‑47322 and are incorporated herein by reference.

* Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act, except as shall be expressly set forth by specific reference in such filing or document.

33

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on the 26 day of March, 2014.

DIRECT INSITE CORP.
By:	/s/ Matthew E. Oakes
	Matthew E. Oakes, Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 26, 2014:

/s/ Matthew E. Oakes	President, Chief Executive Officer and Director
Matthew E. Oakes	(Principal Executive Officer)
/s/ Lowell M. Rush	Chief Financial Officer, Secretary and Treasurer
Lowell Rush	(Principal Financial Officer and Principal Accounting Officer)
/s/ Philip Summe	Chairman of the Board of Directors
Philip Summe
/s/ James A. Cannavino	Director
James A. Cannavino
/s/ Paul Lisiak	Director
Paul Lisiak
/s/ Thomas C. Lund	Director
Thomas C. Lund
/s/ John J. Murabito	Director
John J. Murabito
/s/ Craig W. Thomas	Director
Craig W. Thomas

34

DIRECT INSITE CORP.

FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm	F-1
Financial Statements
Balance Sheets as of December 31, 2013 and 2012	F-2
Statements of Income for the years ended December 31, 2013 and 2012	F-3
Statement of Stockholders’ Equity for the years ended December 31, 2013 and 2012	F-4
Statements of Cash Flows for the years ended December 31, 2013 and 2012	F-5
Notes to Financial Statements	F-6 through F-22

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Audit Committee of the Board of Directors and Stockholders of

Direct Insite Corp.

We have audited the accompanying balance sheets of Direct Insite Corp. (the “Company”) as of December 31, 2013 and 2012 and the related statements of income, stockholders’ equity, and cash flows for the years then ended.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.   We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013 and 2012 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Marcum LLP

Marcum LLP

Fort Lauderdale, FL

March 26, 2014

DIRECT INSITE CORP.

BALANCE SHEETS

(in thousands, except share data)

DECEMBER 31, 2013 AND 2012

	2013			2012
Assets
Current assets:
Cash and cash equivalents	$	1,371		$	1,098
Accounts receivable		1,522			1,689
Prepaid expenses and other current assets		368			261
Deferred tax assets – current		318			305
Total current assets		3,579			3,353
Property and equipment, net		852			615
Deferred tax assets		874			869
Other assets		257			324
Total assets	$	5,562		$	5,161
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	1,402		$	1,165
Current portion of capital lease obligations		187			198
Notes payable		–			32
Deferred rent		23			22
Deferred revenue		–			41
Total current liabilities		1,612			1,458
Capital lease obligations, net of current portion		36			162
Total liabilities		1,648			1,620
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value; 2,000,000 shares authorized; none issued or outstanding		–			–
Common stock, $0.0001 par value; 50,000,000 shares authorized; 12,687,921 and 12,507,870 shares issued and 12,647,994 and 12,467,943 shares outstanding in 2013 and 2012, respectively		1			1
Additional paid-in capital		115,982			115,773
Accumulated deficit		(111,741	)		(111,905	)
Common stock in treasury, at cost; 24,371 shares in 2013 and 2012		(328	)		(328	)
Total stockholders’ equity		3,914			3,541
Total liabilities and stockholders’ equity	$	5,562		$	5,161

See notes to financial statements.

F-2

DIRECT INSITE CORP.

STATEMENTS OF INCOME

(in thousands except per share data)

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

	2013		2012
Revenues:
Recurring	$	7,426	$	7,374
Non-recurring		1,555		1,440
Total revenues		8,981		8,814
Operating costs and expenses:
Operations, research and development		3,626		3,783
Sales and marketing		2,360		2,365
General and administrative		2,451		1,965
Amortization and depreciation		394		375
Total operating costs and expenses		8,831		8,488
Operating income		150		326
Other income (expense)		18		(35	)
Income before provision for income taxes		168		291
Provision for (benefit from) income taxes		4		(174	)
Net income	$	164	$	465
				.
Basic income per share attributable to common stockholders	$	0.01		0.04
Diluted income per share attributable to common stockholders	$	0.01		0.04
Basic weighted average common shares outstanding		12,519		12,321
Diluted weighted average common shares outstanding		12,635		12,328

See notes to financial statements.

F-3

DIRECT INSITE CORP.

STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

(in thousands)

					Additional
	Common Stock				Paid-In		Accumulated			Treasury
	Shares		Amount		Capital		Deficit			Stock			Total
Balance January 1, 2012		12,117	$	1	$	115,333	$	(112,370	)	$	(328	)	$	2,636
Issuance of common stock in settlement of accrued director fees		261		–		277		–			–			277
Employee stock based compensation expense		–		–		98		–			–			98
Common stock issued or issuable for directors’ fees		90		–		65		–			–			65
Net income		–		–		–		465			–			465
Balance December 31, 2012		12,468		1		115,773		(111,905	)		(328	)		3,541
Issuance of common stock in settlement of accrued directors’ fees		21		–		20		–			–			20
Common stock issued on cashless exercise of options		50		–		–		–			–			–
Employee stock based compensation expense		–		–		109		–			–			109
Common stock issued or issuable for directors’ fees		109		–		80		–			–			80
Net income		–		–		–		164			–			164
Balance December 31, 2013		12,648	$	1	$	115,982	$	(111,741	)	$	(328	)	$	3,914

See notes to financial statements.

F-4

DIRECT INSITE CORP.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

(in thousands)

	2013			2012
Cash flows from operating activities:
Net income	$	164		$	465
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation		394			375
Deferred taxes		(18	)		(147	)
Stock-based compensation expense		189			163
Deferred rent expense		1			(8	)
Gain on sale of property and equipment		(8	)		-
Changes in operating assets and liabilities:
Accounts receivable		167			(121	)
Prepaid expenses and other current assets		9			(104	)
Accounts payable and accrued expenses		208			58
Deferred revenue		(41	)		41
Total adjustments		901			257
Net cash provided by operating activities		1,065			722
Cash flows from investing activities:
Purchases of property and equipment		(121	)		(70	)
Capitalization of internally developed software		(433	)		-
Proceeds from the sale of property and equipment		8			-
Net cash used in investing activities		(546	)		(70	)
Cash flows from financing activities:
Repayment of long-term debt		(32	)		(63	)
Repayment of capital lease obligations		(214	)		(178	)
Net cash used in financing activities		(246	)		(241	)
Net increase in cash and cash equivalents		273			411
Cash and cash equivalents – beginning		1,098			687
Cash and cash equivalents – ending	$	1,371		$	1,098
Supplemental disclosure of cash flow information:
Cash paid for interest	$	19		$	11
Cash paid for income taxes	$	21		$	8
Schedule of non-cash investing and financing activities:
Issuance of common stock in settlement of accrued directors’ fees	$	20		$	277
Equipment acquired by capital lease	$	77		$	155

See notes to financial statements.

F-5

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 1 – Nature of Business

Direct Insite Corp. (“Direct Insite” or the “Company”) operates as a Software as a Service provider (“SaaS”), providing financial supply chain automation and workflow efficiencies within the Procure-to-Pay and Order-to-Cash processes. Specifically, Direct Insite’s global electronic invoice (“e-invoice”) management services automate complex manual business processes such as invoice validation, order matching, consolidation, dispute handling, and e-payment processing in a business-to-business transaction based “fee for services” business model.

The Company’s revenue comes from (i) recurring, on-going services that are billed monthly and (ii) non-recurring, professional services derived from the configuration of the Company’s software platform.

Throughout the year, the Company operated redundant data centers in Miami, Florida, and Santa Clara, California.

As described in Note 9, the Company has two major customers (one of which has separate contracts with multiple companies) that accounted for 77.4% and 82.4% of the Company’s revenue for the years ended December 31, 2013 and 2012, respectively.  Loss of either of these customers, or any of the separate contracts under a main customer, could have a material effect on the Company.

In February 2013, the Company was notified by HP Enterprise Services (“HP”), that one of its customers (“HP Customer A”) was terminating its contract effective March 31, 2013.  Despite the Company’s efforts to negotiate a direct contractual agreement with this customer, HP Customer A ultimately decided to sunset its use of the Company’s services. As such, the Company did not record any revenue from HP Customer A after June 30, 2013.  This customer comprised 8.5% of the Company’s revenues for the year ended December 31, 2013, and 13.9% for the year ended December 31, 2012. See Note 9.

Note 2 – Summary of Significant Accounting Policies

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 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.  The most significant estimates are used in the accounting related to stock based compensation, the valuation allowance on deferred tax assets and capitalized internally developed software.

F-6

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 2 – Summary of Significant Accounting Policies (continued)

Use of Estimates (continued)

Actual results could differ from those estimates.

Revenue Recognition

The Company records revenue in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition (“ASC 605”), and SEC Staff Accounting Bulletin Topic 13, Revenue Recognition in Financial Statements.  Revenue is recognized when it is both earned and realizable, that is, when the following criteria are met:

• persuasive evidence of arrangements exist;

• delivery has occurred or services have been rendered;

• the seller’s price is fixed and determinable; and

• collectability is reasonably assured.

The following are the specific revenue recognition policies for each major category of revenue.

Recurring (Ongoing Services)

The Company provides transactional data processing services through its SaaS software solutions to its customers.  The customer is charged a monthly fixed rate on a per transaction basis or a fixed fee based on monthly transaction volumes. Revenue is recognized as the services are provided.

Non-Recurring (Professional Services)

The Company provides non-recurring engineering services to its customers, which may include initial or additional development, modification, and customization services to the Company’s software platform.  Such services are billed based on: (i) hourly rates; or (ii) milestone billings.  For hourly billed services, revenue is recognized when work is performed.  For milestone billed services, revenue is recognized when the project milestone has been accepted by the customer.  The Company does not sell software licenses, upgrades or enhancements, or post-contract customer services.

F-7

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 2 – Summary of Significant Accounting Policies (continued)

Cost of Revenue

Cost of revenue in the statements of income is included in operations, research and development costs and exclusive of amortization and depreciation which is shown separately.  Professional Service costs related to uncompleted milestones are deferred and included in other current assets, when applicable.

Property and Equipment

Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the related assets.  Leasehold improvements are amortized over the terms of the respective leases or the service lives of the related assets, whichever is shorter.

Capitalized lease assets are amortized over the shorter of the lease term or the service life of the related assets.

Internally Developed Software

The Company is in the process of developing a next generation version of its accounts receivable platform. It is being designed for one of the Company’s clients and will be available to all order-to-cash process customers. According to ASC 350-40, Intangibles-Goodwill and Other-Internal-Use Software, the Company capitalizes the costs associated with the application development stage of a project. The Company will start amortizing capitalized costs when the software is ready for use and placed in service. The capitalized costs will be amortized on a straight-line basis over the estimated three year useful life of the software.

Impairment of Long-Lived Assets

ASC 360, Property, Plant and Equipment (“ASC 360”) requires management judgments regarding the future operating and disposition plans for marginally performing assets, and estimates of expected realizable values for assets to be sold.  The Company accounts for its long-lived assets in accordance with ASC 360 for purposes of determining and measuring impairment.  It is the Company’s policy to review the value assigned to its long lived assets, to determine if they have been permanently impaired by adverse conditions whenever events or circumstances indicate the related carrying amount may not be recoverable.  If required, an impairment charge would be recorded based on an estimate of future discounted cash flows.  In order to test for recoverability, the Company would compare the sum of an undiscounted cash flow projection from the related long-lived assets to the net carrying amount of such assets.  Considerable management judgment is necessary to estimate undiscounted future operating cash flows and fair values and, accordingly, actual results could vary significantly from such estimates.  No impairment charges were recognized during the years ended December 31, 2013 and 2012.

F-8

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 2 – Summary of Significant Accounting Policies (continued)

Income Taxes

The Company accounts for income taxes using the asset and liability method.  This method requires the determination of deferred tax assets and liabilities based on the differences between the financial statement and income tax basis of assets and liabilities, using enacted tax rates.  Additionally, net deferred tax assets are adjusted by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax assets will not be realized.  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 future realization of a portion of its reserved deferred tax assets related to tax benefits associated with the exercise of stock options, if and when realized, will not result in a tax benefit in the statement of income, but rather will result in an increase in additional paid-in capital. The Company will continue to re-assess its reserves on deferred income tax assets in future periods on a quarterly basis.

Earnings Per Share

The Company displays earnings per share in accordance with ASC 260, Earnings Per Share (“ASC 260”).  ASC 260 requires dual presentation of basic and diluted earnings per share (“EPS”).  Basic earnings per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period.  Diluted earnings per share includes the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

The computation of basic and diluted earnings per share is as follows:

For the year ended December 31, 2013 (in thousands, except per share amounts)

	Net Income		Shares		Per Share
	Numerator		Denominator		Amount
Basic Earnings Per Share
Net income attributable to common stockholders	$	164		12,519	$	0.01
Effect of Dilutive Securities
Options		–		87
Restricted stock		–		29
Diluted Earnings Per Share	$	164		12,635	$	0.01

F-9

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 2 – Summary of Significant Accounting Policies (continued)

Earnings Per Share (continued)

For the year ended December 31, 2012 (in thousands, except per share amounts)

	Net Income		Shares		Per Share
	Numerator		Denominator		Amount
Basic Earnings Per Share
Net income attributable to common stockholders	$	465		12,321	$	0.04
Effect of Dilutive Securities
Options		–		–
Restricted stock		–		7
Diluted Earnings Per Share	$	465		12,328	$	0.04

Securities that could potentially dilute basic EPS in the future, that were not included in the computation of diluted EPS because to do so would have been anti-dilutive for the periods presented, consist of the following (in thousands):

	December 31,
Anti-Dilutive Potential Common Shares	2013		2012
Options to purchase common stock		333		906
Unvested stock grants		–		53
Total Anti-Dilutive Potential Common Shares		333		959

Cash and Cash Equivalents

The Company considers all investments with original maturities of three months or less to be cash equivalents.

Allowance for Doubtful Accounts

The allowance for doubtful accounts reflects management’s best estimate of probable losses inherent in the accounts receivable balance.  Management determines the allowance based on known troubled accounts, historical experience, and other currently available evidence.  Management performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer's current credit worthiness, as determined by the review of their current credit information.  Collections and payments from customers are continuously monitored.  While such bad debt expenses have historically been within expectations and allowances established, the Company cannot guarantee that it will continue to experience the same credit loss rates that it has in the past.  At December 31, 2013 and 2012, an allowance for doubtful accounts is not provided since, in the opinion of management, all accounts are deemed collectible.  If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, allowances may be required.

F-10

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 2 – Summary of Significant Accounting Policies (continued)

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”).  ASC 718 establishes accounting for stock-based awards exchanged for employee services.  Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period (generally the vesting period of the equity grant) using the straight-line method.

The fair value of the Company’s common stock options are estimated using the Black Scholes-Merton option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate; and the expected life.  The Company calculates the expected volatility using the historical volatility over the most recent period equal to the expected term and evaluates the extent to which available information indicate that future volatility may differ from historical volatility. The expected dividend rate is zero as the Company does not expect to pay or declare any cash dividends on common stock. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant.

The Company has not experienced significant exercise activity on stock options. The Company determines the expected term of its stock option awards issued using the simplified method.  The simplified method assumes each vesting tranche of the award has a term equal to the midpoint between when the award vests and when the award expires.

In accordance with ASC 718, excess tax benefits realized from the exercise of stock-based awards are classified in cash flows from financing activities.  The future realization of the reserved deferred tax assets related to these tax benefits associated with the exercise of stock options will result in a credit to additional paid-in capital if the related tax deduction reduces taxes payable.  The Company has elected the “with and without approach” regarding ordering of windfall tax benefits to determine whether the windfall tax benefit did reduce taxes payable in the current year.  Under this approach, the windfall tax benefit would be recognized in additional paid-in-capital only if an incremental tax benefit is realized after considering all other benefits presently available.

Fair Value of Financial Instruments

The carrying value of the Company’s accounts receivable and accounts payable approximates their fair value due to the short-term maturity of such instruments.  The carrying value of capital lease obligations and notes payable approximate their fair value because the terms of these instruments approximate prevailing market rates.

F-11

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 2 – Summary of Significant Accounting Policies (continued)

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable.  The Company has cash deposits in excess of the maximum amounts insured by FDIC at December 31, 2013.

The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers.  Concentrations of credit risk with respect to accounts receivable and revenue are disclosed in Note 9.

Recently Issued and Adopted Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective accounting standards, if currently adopted, would have a material effect on the financial statements.

Note 3 – Property and Equipment

Property and equipment consist of the following as of December 31, 2013 and 2012:

	2013			2012
Computer equipment and purchased software (3 years)	$	1,361		$	5,056
Internally developed software not yet placed in service    (3 years)		433			–
Furniture and fixtures and leasehold improvements (5 – 7 years)		146			91
		1,940			5,147
Less: accumulated depreciation and amortization		(1,088	)		(4,532	)
Property and equipment, net	$	852		$	615

Depreciation and amortization expense related to property and equipment for the years ended December 31, 2013 and 2012 was approximately $394,000 and $375,000, respectively.

F-12

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 4 – Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following as of December 31, 2013 and 2012:

	2013		2012
	(in thousands)
Trade accounts payable	$	324	$	141
Sales taxes payable		539		539
Accrued directors’ fees		377		261
Other accrued expenses		162		224
Total Accounts Payable and Accrued Expenses	$	1,402	$	1,165

Note 5 – Debt

Notes Payable

At December 31, 2012, notes payable consisted of approximately $32,000 of borrowings for the purchase of equipment. These notes, which were paid in full during the year ended December 31, 2013, bore interest at rates ranging from 8.0% to 9.5% per year and matured in August 2013.

Capital Lease Obligations

The Company has equipment under six capital lease obligations expiring at various times through June 2016.  The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair values of the assets.

At December 31, 2013, future minimum payments under these capital leases are:

Year Ending	Amount
December 31,	(in thousands)
2014	$	198
2015		31
2016		10
Total minimum lease payments		239
Less: amounts representing interest		(16	)
Net minimum lease payments		223
Current portion		187
Long-term portion	$	36

The implied annual interest rates related to these capital leases range from 0.0% to 9.0%. As of December 31, 2013, the gross book value and the net book value of the related assets included in property and equipment is approximately $646,000 and $241,000, respectively.

Amortization of assets under capital leases is included in depreciation expense.

F-13

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 6 – Stockholders’ Equity

Preferred Stock

The Company has 2,000,000 authorized preferred shares of which none were issued and outstanding at December 31, 2013 and 2012.

Common Stock, Options and Stock Grants

Year Ended December 31, 2013

During the year ended December 31, 2013, 98,000 restricted common shares were granted with an aggregate grant date fair value of approximately $80,000.  During the year ended December 31, 2013, approximately 109,000 restricted common shares with an aggregate grant date fair value of approximately $80,000 vested.

During the year ended December 31, 2013, the Company issued 55,181 shares of restricted common stock with a grant date fair value of approximately $42,000, pursuant to the Company’s Directors’ Deferred Compensation Plan dated January 1, 2008 (the “Directors’ Deferred Compensation Plan”), to a former director for past services. 20,595 of the 55,181 shares of restricted common stock were issued to settle approximately by $20,000 of accrued directors’ fees recorded on the Company’s balance sheet.

During the year ended December 31, 2013, the Company granted, to employees of the Company, options to acquire 360,909 shares of common stock with exercise prices of $1.15 (for a grant of 15,000 options), $1.25 per share (for grants of 75,000 options), $1.50 (for a grant of 80,000 options), and $1.65 per share (for grants of 190,909 options), 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 grant date fair value of the stock options issued was determined to be approximately $330,000.  During the year ended December 31, 2013, the Company recognized approximately $109,000 of expense related to the vesting of outstanding stock options.  For the year ended December 31, 2013, options to acquire 56,500 shares of common stock with a weighted average exercise price of $1.43 expired unexercised, and options to acquire 236,875 shares of common stock with a weighted average exercise price of $1.14 were forfeited. On September 5, 2013, Matthew E. Oakes, the Company’s President and Chief Executive Officer, received 50,348 shares of the Company’s common stock in a cashless exercise of 172,500 stock options that had an exercise price of $1.15 per share.

F-14

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 6 – Stockholders’ Equity (continued)

Common Stock, Options and Stock Grants (continued)

Year Ended December 31, 2012

During the year ended December 31, 2012, 150,000 restricted common shares were granted with an aggregate grant date fair value of approximately $99,000.  During the year ended December 31, 2012, 89,607 restricted common shares with an aggregate grant date fair value of approximately $65,000 vested, and 35,000 of unvested restricted common shares with an aggregate grant date fair value of approximately $26,000 were forfeited.

During the year ended December 31, 2012, the Company granted, to certain employees of the Company, options to acquire an aggregate of 875,000 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 grant date fair value of the stock options granted during the year ended December 31, 2012 was determined to be approximately $527,000, of which approximately $98,000 was recognized as stock compensation expense for the year ended December 31, 2012.  During the year ended December 31, 2012, options to acquire 17,000 shares of common stock with a grant date fair value of approximately $12,000 expired unexercised and options to acquire 80,000 shares of common stock with a grant date fair value of approximately $46,000 were forfeited.  On April 5, 2012, the Company issued 261,503 shares of common stock with a grant date fair value of approximately $277,000, pursuant to the Direct Insite Corp. Directors’ Deferred Compensation Plan dated January 1, 2008, to two former Directors for past services.

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.  On April 1, 2013, the Company’s 2003 Stock Option/Stock Issuance Plan and its 2003-A Stock Option/Stock Issuance Plan expired resulting in the expiration of 278,532 and 37,325 options, respectively, available for issuance.  As of December 31, 2013, 12,894 shares were available for issuance under the Company’s 2004 Stock Option/Stock Issuance Plan, its sole remaining plan under which options may be issued.

F-15

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 6 – Stockholders’ Equity (continued)

Stock Option Plans (continued)

The following is a summary of stock option activity for the year ended December 31, 2013, relating to all of the Company’s common stock plans (share amounts are in thousands):

	Shares			Weighted Average Exercise		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(in thousands)			Price		(in years)		(in thousands)
Outstanding at January 1, 2013		906		$	1.17		3.90	$	--
Granted		361		$	1.51			$	2
Expired		(57	)	$	1.43			$	1
Exercised		(173	)	$	1.15			$	19
Forfeited		(237	)	$	1.14			$	26
Outstanding at December 31, 2013		800		$	1.31		3.77	$	57
Exercisable at December 31, 2013		188		$	1.16		3.06	$	19

During the year ended December 31, 2013, Company granted approximately 361,000 stock options with weighted average grant date fair values of $0.91 per share.   During the year ended December 31, 2012, Company granted approximately 875,000 stock options with weighted average grant date fair values of $0.60 per share.  The fair values of the stock options granted were estimated on the date of grant using the Black-Scholes-Merton option-pricing model that uses the following weighted-average assumptions for the years ended December 31, 2013 and 2012:

	2013		2012
Expected term	3.75 years		3.75 years
Expected volatility		91% - 97%		154% - 175%
Expected dividend yield		--		--
Risk-free interest rate		0.6% - 0.8%		0.36% - 0.74%

F-16

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 6 – Stockholders’ Equity (continued)

The following table summarizes stock option information as of December 31, 2013:

Exercise Prices		Number Outstanding (in thousands)	Weighted Average Remaining Contractual Life	Options Exercisable (in thousands)
$	1.15	498	3.29 years		157
$	1.20	31	2.48 years		31
$	1.50	80	4.97 years		-
$	1.65	191	4.74 years		-
Total		800	3.77 years		188

As of December 31, 2013, there was approximately $299,000 of unrecognized compensation costs related to stock options outstanding that will be recognized as expense over a weighted average period of 3.15 years.

Restricted Stock Grant

A summary of activity related to the Company’s non-vested stock grants for the year ended December 31, 2013 is presented below:

Non-Vested Shares	Shares (in thousands)			Weighted-Average Grant Date Fair Value
Non-Vested at January 1, 2013		60		$	0.66
Granted		98		$	0.82
Vested		(109	)	$	0.73
Non-Vested at December 31, 2013		49		$	0.82

The future expected expense for non-vested shares is approximately $40,000 and will be recognized on a straight-line basis over the period from January 1, 2014 through December 31, 2014.

Note 7 – Income Taxes

The Company accounts for income taxes in accordance with ASC 740 which prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim period, disclosure and transition.  There were no unrecognized tax benefits as of December 31, 2013 and 2012.

The Company has identified its federal tax return and its state tax return in Florida as “major” tax jurisdictions, as defined in ASC 740, Income Taxes.  Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring

F-17

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 7 – Income Taxes (continued)

recognition in the Company’s financial statements.  The Company’s evaluation was performed for tax years ended 2010 through 2013, the only periods subject to examination.  The Company believes that its income tax positions and deductions will be sustained upon audit and does not anticipate any adjustments that will result in a material change to its financial position.  The Company has elected to classify interest and penalties incurred on income taxes, if any, as income tax expense.  No interest or penalties on income taxes have been recorded during the years ended December 31, 2013 and 2012.  The Company does not expect its unrecognized tax benefit position to change during the next twelve months.  Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

The following table summarizes components of the provision for (benefit from) current and deferred income taxes for the years ended December 31, 2013 and 2012:

	2013			2012
	(in thousands)
Current
Federal	$	0		$	(30	)
State and other		22			3
Total Current		22			(27	)
Deferred
Federal		(15	)		(125	)
State and other		(3	)		(22	)
Total Deferred		(18	)		(147	)
Provision for (Benefit from) Income Taxes	$	4		$	(174	)

F-18

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 7 – Income Taxes (continued)

The following table summarizes the significant differences between the U.S. Federal statutory tax rate and the Company’s effective tax rate for financial statement purposes for the years ended December 31, 2013 and 2012:

	2013			2012
U.S. Federal Statutory Tax Rate		34.0	%		34.0	%
Permanent items		13.0	%		9.0	%
State taxes		5.0	%		3.0	%
Other		0.0	%		(2.0	)%
Decrease in valuation allowance		(50.0	)%		(104.0	)%
Totals		2.0	%		(60.0	)%

The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2013 and 2012 are summarized as follows:

	2013			2012
	(in thousands)
Deferred Tax Assets
Net operating loss carryforwards	$	9,670		$	9,816
Tax credit carryforwards		347			347
Fixed and intangible assets		43			30
Deferred revenue		0			1
Value of stock options and stock compensation		338			298
Deferred rent		9			8
Capital loss carryforward		517			517
Accruals		142			114
		11,066			11,131
Valuation Allowance		(9,874	)		(9,957	)
Deferred Tax Assets, Net	$	1,192		$	1,174

F-19

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 7 – Income Taxes (continued)

The change in the valuation allowance for deferred tax assets for the years ended December 31, 2013 and 2012 are summarized as follows:

	2013			2012
Beginning Balance	$	9,957		$	13,827
Change in Allowance		(83	)		(3,870	)
Ending Balance	$	9,874		$	9,957

At December 31, 2013, the Company has federal and state net operating loss carryforwards (“NOLs”) remaining of approximately $26 million and $20 million, respectively, which may be available to reduce taxable income, if any.  Approximately $0 and $9.1 million of federal NOLs expired in 2013 and 2012, respectively.  Remaining federal and state net operating loss carryforwards expire from 2019 through 2033.  However, Internal Revenue Code Section 382 rules limit the utilization of NOLs upon an ownership change of a company.  During 2013, the Company performed an evaluation as to whether an ownership change had taken place.  Management believes that there has been no ownership change as such applies to Section 382.  However, if it is determined that an ownership change has taken place, either historically or in the future, utilization of its NOLs will be subject to limitations, which could eliminate a substantial portion of the future income tax benefits of the NOLs.  The NOL carryforward as of December 31, 2013 included approximately $1,193,000 related to windfall tax benefits for which a benefit would be recorded in additional paid-in capital if and when realized.

During 2013, the Company reviewed previous positive and negative evidence and also reviewed its expected taxable income for future periods and concluded it is more likely than not that approximately $1,192,000 of tax benefits relating to NOLs will be utilized.  Accordingly, the Company recorded a tax benefit in the amount of $18,000 during the year ended December 31, 2013, reflecting the change from December 31, 2012.

F-20

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 8 – Commitments and Contingencies

Operating Leases

Operating leases are primarily for office space, data centers, equipment and automobiles.

On October 24, 2012, the Company entered into a 66-month lease for 5,806 square feet of office space in downtown Ft. Lauderdale, Florida. The Company relocated its corporate headquarters from Sunrise, Florida to the new location upon the termination of the lease in February 2013.

At December 31, 2013, the future minimum lease payments under operating leases are summarized as follows:

Year Ending December 31,	Amount
2014	$	533,000
2015		503,000
2016		109,000
2017		112,000
2018		77,000
Total	$	1,334,000

Rent expense approximated $558,000 and $529,000 for the years ended December 31, 2013 and 2012, respectively.

Employment Agreements

The Company has an employment agreement with Mr. Oakes for a term effective June 1, 2013 through December 31, 2015.  The agreement provides for a base salary of $24,583 per month for 2014 and 2015, annual incentive bonuses based on the Company’s performance in achieving prescribed revenue and earnings before interest and taxes (“EBIT”) targets, and discretionary bonuses.  The agreement also provides for reimbursement of all out-of-pocket expenses reasonably incurred by him in the performance of his duties hereunder and certain severance benefits in the event of termination prior to the expiration date.  If Mr. Oakes is terminated without cause or resigns from employment for “good reason” (as defined within Mr. Oakes’ employment agreement), he would receive one-year of base salary and COBRA coverage at the Company’s expense for the number of months he receives severance payments.

F-21

DIRECT INSITE CORP.

NOTES TO FINANCIAL STATEMENTS

Note 8– Commitments and Contingencies (continued)

Employment Agreements (continued)

The Company shall continue to make lease payments on the corporate apartment located in Ft. Lauderdale, Florida and utilized by Mr. Oakes through the date of termination of such lease on December 31, 2015, in lieu of the Company’s reimbursement of up to $25,000 of relocation expenses as originally provided in the Agreement.

Note 9 – Major Customers

Two customers, HP Enterprise Services (“HP”) and International Business Machines Corp. (“IBM”), accounted for a significant portion of the Company’s revenues as follows:

	% of Total Revenues Year Ended December 31,
	2013			2012
HP Customer A		8.5	%		13.9	%
HP Customer B		13.8			14.6
HP Customer C		12.2			15.1
HP Customer D		10.6			5.5
Total HP		45.1	%		49.1	%
IBM		32.3			33.3
Total Major Customers		77.4	%		82.4	%
Others		22.6			17.6
Total		100.0	%		100.0	%

As of December 31, 2013 and 2012, HP and IBM accounted for a significant portion of the Company’s accounts receivable as follows (in thousands):

	December 31,
	2013		2012
Total HP	$	519	$	827
IBM		505		552
Total	$	1,024	$	1,379

Note 10 – Subsequent Events

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

F-22

EX-23.1

EXHIBIT 23.1

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT

We consent to the incorporation by reference in the Registration Statement of Direct Insite Corp. on Form S-8 [File No. 333-144015] of our report dated March 26, 2014, with respect to our audits of the financial statements of Direct Insite Corp. as of December 31, 2013 and 2012 and for the years the ended, which report is included in this Annual Report on Form 10-K of Direct Insite Corp. for the year ended December 31, 2013.

/s/ Marcum LLP

Marcum LLP

Fort Lauderdale, Florida

March 26, 2014

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECURITIES EXCHANGE ACT RULE 13A-14(A)/15D-14(A)

I, Matthew E. Oakes, certify that:

1. I have reviewed this report on Form 10-K 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.

March 26, 2014	/s/ Matthew E. Oakes
	Matthew E. Oakes
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECURITIES EXCHANGE ACT RULE 13A-14(A)/15D-14(A)

I, Lowell M. Rush, certify that:

1. I have reviewed this report on Form 10-K 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.

March 26, 2014	/s/ Lowell M. Rush
	Lowell M. Rush
	Chief Financial Officer
	(Principal Accounting Officer and
	Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

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 Annual Report of Direct Insite Corp., (the "Company") on Form 10-K for the year ending December 31, 2013 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 result of operations of the Company.

Date: March 26, 2014	/s/ Matthew E. Oakes
	Matthew E. Oakes
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

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 Annual Report of Direct Insite Corp., (the "Company") on Form 10-K for the year ending December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Lowell M. Rush, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 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 result of operations of the Company.

Date: March 26, 2014	/s/ Lowell M. Rush
	Lowell M. Rush
	Chief Financial Officer
	(Principal Accounting Officer and
	Principal Financial Officer)

XML

COMMITMENTS AND CONTINGENCIES (Details) (USD $)	12 Months Ended
	Dec. 31, 2013 sqft	Dec. 31, 2012
Operating Leases [Abstract]
Duration of lease agreement	66 months
Operating Lease for office space (in square foot)	5,806
Summary of future minimum lease payments under operating leases [Abstract]
2014	$ 533,000
2015	503,000
2016	109,000
2017	112,000
2018	77,000
Total	1,334,000
Rent expense	558,000	529,000
President and Chief Executive Officer [Member]
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Base salary per month as per employment agreements	24,583
Expenses incurred in connection with relocation	$ 25,000

XML

MAJOR CUSTOMERS (Tables)

12 Months Ended

Dec. 31, 2013

Revenues [Member]

Concentration Risk [Line Items]

Customers Accounted for Significant Portion of Revenues and Accounts Receivable

Two customers, HP Enterprise Services (“HP”) and International Business Machines Corp. (“IBM”), accounted for a significant portion of the Company’s revenues as follows:

	% of Total Revenues Year Ended December 31,
	2013			2012
HP Customer A		8.5	%		13.9	%
HP Customer B		13.8			14.6
HP Customer C		12.2			15.1
HP Customer D		10.6			5.5
Total HP		45.1	%		49.1	%
IBM		32.3			33.3
Total Major Customers		77.4	%		82.4	%
Others		22.6			17.6
Total		100.0	%		100.0	%

Accounts Receivable [Member]

Concentration Risk [Line Items]

Customers Accounted for Significant Portion of Revenues and Accounts Receivable

As of December 31, 2013 and 2012, HP and IBM accounted for a significant portion of the Company’s accounts receivable as follows (in thousands):

	December 31,
	2013		2012
Total HP	$	519	$	827
IBM		505		552
Total	$	1,024	$	1,379

XML

PROPERTY AND EQUIPMENT

12 Months Ended

Dec. 31, 2013

PROPERTY AND EQUIPMENT [Abstract]

PROPERTY AND EQUIPMENT

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following as of December 31, 2013 and 2012:

	2013			2012
Computer equipment and purchased software (3 years)	$	1,361		$	5,056
Internally developed software not yet placed in service    (3 years)		433			–
Furniture and fixtures and leasehold improvements (5 – 7 years)		146			91
		1,940			5,147
Less: accumulated depreciation and amortization		(1,088	)		(4,532	)
Property and equipment, net	$	852		$	615

Depreciation and amortization expense related to property and equipment for the years ended December 31, 2013 and 2012 was approximately $394,000 and $375,000, respectively.

XML

ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Summary of Accounts Payable and Accrued Expenses [Abstract]
Trade accounts payable	$ 324	$ 141
Sales taxes payable	539	539
Accrued directors' fees	377	261
Other accrued expenses	162	224
Total Accounts Payable and Accrued Expenses	$ 1,402	$ 1,165

XML

PROPERTY AND EQUIPMENT (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Summary of property and equipment [Abstract]
Property and equipment, gross	$ 1,940	$ 5,147
Less: accumulated depreciation and amortization	(1,088)	(4,532)
Property and equipment, net	852	615
Depreciation and amortization	394	375
Computer Equipment and Purchased Software [Member]
Summary of property and equipment [Abstract]
Property and equipment, gross	1,361	5,056
Estimated useful lives	3 years
Internally Developed Software [Member]
Summary of property and equipment [Abstract]
Property and equipment, gross	433	0
Estimated useful lives	3 years
Furniture and Fixtures and Leasehold Improvements [Member]
Summary of property and equipment [Abstract]
Property and equipment, gross	$ 146	$ 91
Furniture and Fixtures and Leasehold Improvements [Member] | Minimum [Member]
Summary of property and equipment [Abstract]
Estimated useful lives	5 years
Furniture and Fixtures and Leasehold Improvements [Member] | Maximum [Member]
Summary of property and equipment [Abstract]
Estimated useful lives	7 years

XML

DEBT (Details) (USD $)	12 Months Ended
	Dec. 31, 2013 Lease	Dec. 31, 2012
Capital Leased Assets [Line Items]
Number of capital lease obligations equipments	6
Expiry period of capital lease obligations	June 30, 2016
Summary of Future Minimum Payments Under Capital Lease [Abstract]
2014	$ 198,000
2015	31,000
2016	10,000
Total minimum lease payments	239,000
Less: amounts representing interest	(16,000)
Net minimum lease payments	223,000
Current portion	187,000	198,000
Long-term portion	36,000	162,000
Gross book value of capital leased assets	646,000
Net book value of capital leased assets	241,000
Minimum [Member]
Summary of Future Minimum Payments Under Capital Lease [Abstract]
Interest rate capital leases (in hundredths)	0.00%
Maximum [Member]
Summary of Future Minimum Payments Under Capital Lease [Abstract]
Interest rate capital leases (in hundredths)	9.00%
Notes Payable [Member]
Debt Instrument [Line Items]
Notes payable		$ 32,000
Interest rate of notes, minimum (in hundredths)	8.00%
Interest rate of notes, maximum (in hundredths)	9.50%
Maturity date of notes	Aug. 31, 2013

XML

STOCKHOLDERS' EQUITY (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Preferred Stock [Abstract]
Preferred stock, authorized (in shares)	2,000,000	2,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Common Stock, Options and Stock Grants [Abstract]
Percentage of stock options vesting up-to first anniversary (in hundredths)	25.00%	25.00%
Percentage of stock options vesting from year two to fifth anniversary (in hundredths)	75.00%	75.00%
Value of stock issued during the period	$ 109,000	$ 98,000
Summary of stock option information [Abstract]
Number Outstanding (in shares)	800,000
Weighted Average Remaining Contractual Life	3 years 9 months 7 days
Options Exercisable (in shares)	188,000
Unrecognized compensation costs related to stock options	299,000
Unrecognized compensation weighted average period	3 years 1 month 24 days
$1.15 [Member]
Summary of stock option information [Abstract]
Exercise Prices (in dollars per share)	$ 1.15	$ 1.15
Number Outstanding (in shares)	498,000
Weighted Average Remaining Contractual Life	3 years 3 months 14 days
Options Exercisable (in shares)	157,000
$1.20 [Member]
Summary of stock option information [Abstract]
Exercise Prices (in dollars per share)	$ 1.20
Number Outstanding (in shares)	31,000
Weighted Average Remaining Contractual Life	2 years 5 months 23 days
Options Exercisable (in shares)	31,000
$1.50 [Member]
Summary of stock option information [Abstract]
Exercise Prices (in dollars per share)	$ 1.50
Number Outstanding (in shares)	80,000
Weighted Average Remaining Contractual Life	4 years 11 months 19 days
Options Exercisable (in shares)	0
$1.65 [Member]
Summary of stock option information [Abstract]
Exercise Prices (in dollars per share)	$ 1.65
Number Outstanding (in shares)	191,000
Weighted Average Remaining Contractual Life	4 years 8 months 26 days
Options Exercisable (in shares)	0
$1.25 [Member]
Summary of stock option information [Abstract]
Exercise Prices (in dollars per share)	$ 1.25
Director [Member]
Common Stock, Options and Stock Grants [Abstract]
Shares issued under deferred compensation plan (in shares)	55,181	261,503
Shares issued under deferred compensation plan	42,000	277,000
Number of employees to whom shares issued under deferred compensation arrangement		2
Stock issued during the period (in shares)	20,595
Value of stock issued during the period	20,000
Restricted Stock Grants [Member]
Common Stock, Options and Stock Grants [Abstract]
Aggregate grant date fair value of restricted common shares	80,000	99,000
Grant date fair value of vested stock option	80,000	65,000
Aggregate grant date fair value of unvested restricted common shares forfeited		26,000
Shares [Abstract]
Non-Vested, beginning balance (in shares)	60,000
Granted (in shares)	98,000	150,000
Vested (in shares)	(109,000)	(89,607)
Forfeited (in shares)		(35,000)
Non-Vested, ending balance (in shares)	49,000	60,000
Weighted-Average Grant Date Fair Value [Abstract]
Non-Vested, beginning balance (in dollars per share)	$ 0.66
Granted (in dollars per share)	$ 0.82
Vested (in dollars per share)	$ 0.73
Non-Vested, ending balance (in dollars per share)	$ 0.82	$ 0.66
Future expected expense for non-vested shares to be recognized	40,000
Stock Options [Member]
Common Stock, Options and Stock Grants [Abstract]
Term of stock option grant	5	5
Vesting period of stock option	4 years	4 years
Grant date fair value of option	330,000	527,000
Recognized stock compensation expense	109,000	98,000
Grant date fair value of options expired	12,000
Grant date fair value of options forfeited	46,000
Stock Option Plans [Abstract]
Expiration period of stock option	5 years
Number of shares available for issuance under stock option plans (in shares)	12,894
Number of shares no longer available due to expiration of plan (in shares)	278,532
Shares [Abstract]
Outstanding, beginning balance (in shares)	906,000
Granted (in shares)	361,000	875,000
Expired (in shares)	(57,000)
Exercised (in shares)	(173,000)
Forfeited (in shares)	(237,000)
Outstanding, ending balance (in shares)	800,000	906,000
Exercisable, ending balance (in shares)	188,000
Weighted Average Exercise Price [Abstract]
Outstanding, beginning balance (in dollars per share)	$ 1.17
Granted (in dollars per share)	$ 1.51
Expired (in dollars per share)	$ 1.43
Exercised (in dollars per share)	$ 1.15
Forfeited (in dollars per share)	$ 1.14
Outstanding, ending balance (in dollars per share)	$ 1.31	$ 1.17
Exercisable, ending balance (in dollars per share)	$ 1.16
Weighted Average Remaining Contractual Term (in years) [Abstract]
Outstanding, beginning balance	3 years 9 months 7 days	3 years 10 months 24 days
Outstanding, ending balance	3 years 9 months 7 days	3 years 10 months 24 days
Exercisable, ending balance	3 years 0 months 22 days
Aggregate Intrinsic Value [Abstract]
Outstanding, beginning balance	0
Granted	2,000
Expired	1,000
Exercised	19,000
Forfeited	26,000
Outstanding, ending balance	57,000	0
Exercisable, ending balance	$ 19,000
Weighted average grant date fair value (in dollars per share)	$ 0.91	$ 0.60
Schedule of stock option granted assumptions [Abstract]
Expected term	3 years 9 months	3 years 9 months
Expected dividend rate (in hundredths)	0.00%	0.00%
Shares [Abstract]
Expired (in shares)		(17,000)
Forfeited (in shares)		(80,000)
Stock Options [Member] | $1.15 [Member]
Shares [Abstract]
Granted (in shares)	15,000	875,000
Stock Options [Member] | $1.50 [Member]
Shares [Abstract]
Granted (in shares)	80,000
Stock Options [Member] | $1.65 [Member]
Shares [Abstract]
Granted (in shares)	190,909
Stock Options [Member] | $1.25 [Member]
Shares [Abstract]
Granted (in shares)	75,000
Stock Options [Member] | President and Chief Executive Officer [Member]
Common Stock, Options and Stock Grants [Abstract]
Shares issued under deferred compensation plan (in shares)	50,348
Stock Issuance Plan [Member]
Stock Option Plans [Abstract]
Number of shares no longer available due to expiration of plan (in shares)	37,325
Minimum [Member] | Stock Options [Member]
Common Stock, Options and Stock Grants [Abstract]
Vesting period of stock option	3 years
Schedule of stock option granted assumptions [Abstract]
Expected volatility (in hundredths)	91.00%	154.00%
Risk free interest rate (in hundredths)	0.60%	0.36%
Maximum [Member] | Stock Options [Member]
Common Stock, Options and Stock Grants [Abstract]
Vesting period of stock option	4 years
Schedule of stock option granted assumptions [Abstract]
Expected volatility (in hundredths)	97.00%	175.00%
Risk free interest rate (in hundredths)	0.80%	0.74%

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 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.  The most significant estimates are used in the accounting related to stock based compensation, the valuation allowance on deferred tax assets and capitalized internally developed software.

Actual results could differ from those estimates.

REVENUE RECOGNITION

The Company records revenue in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition (“ASC 605”), and SEC Staff Accounting Bulletin Topic 13, Revenue Recognition in Financial Statements.  Revenue is recognized when it is both earned and realizable, that is, when the following criteria are met:

• persuasive evidence of arrangements exist;

• delivery has occurred or services have been rendered;

• the seller’s price is fixed and determinable; and

• collectability is reasonably assured.

The following are the specific revenue recognition policies for each major category of revenue.

Recurring (Ongoing Services)

The Company provides transactional data processing services through its SaaS software solutions to its customers.  The customer is charged a monthly fixed rate on a per transaction basis or a fixed fee based on monthly transaction volumes. Revenue is recognized as the services are provided.

Non-Recurring (Professional Services)

The Company provides non-recurring engineering services to its customers, which may include initial or additional development, modification, and customization services to the Company’s software platform.  Such services are billed based on: (i) hourly rates; or (ii) milestone billings.  For hourly billed services, revenue is recognized when work is performed.  For milestone billed services, revenue is recognized when the project milestone has been accepted by the customer.  The Company does not sell software licenses, upgrades or enhancements, or post-contract customer services.

COST OF REVENUE

Cost of revenue in the statements of income is included in operations, research and development costs and exclusive of amortization and depreciation which is shown separately.  Professional Service costs related to uncompleted milestones are deferred and included in other current assets, when applicable.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the related assets.  Leasehold improvements are amortized over the terms of the respective leases or the service lives of the related assets, whichever is shorter.

Capitalized lease assets are amortized over the shorter of the lease term or the service life of the related assets.

INTERNALLY DEVELOPED SOFTWARE

The Company is in the process of developing a next generation version of its accounts receivable platform. It is being designed for one of the Company’s clients and will be available to all order-to-cash process customers. According to ASC 350-40, Intangibles-Goodwill and Other-Internal-Use Software, the Company capitalizes the costs associated with the application development stage of a project. The Company will start amortizing capitalized costs when the software is ready for use and placed in service. The capitalized costs will be amortized on a straight-line basis over the estimated three year useful life of the software.

IMPAIRMENT OF LONG-LIVED ASSETS

ASC 360, Property, Plant and Equipment (“ASC 360”) requires management judgments regarding the future operating and disposition plans for marginally performing assets, and estimates of expected realizable values for assets to be sold.  The Company accounts for its long-lived assets in accordance with ASC 360 for purposes of determining and measuring impairment.  It is the Company’s policy to review the value assigned to its long lived assets, to determine if they have been permanently impaired by adverse conditions whenever events or circumstances indicate the related carrying amount may not be recoverable.  If required, an impairment charge would be recorded based on an estimate of future discounted cash flows.  In order to test for recoverability, the Company would compare the sum of an undiscounted cash flow projection from the related long-lived assets to the net carrying amount of such assets.  Considerable management judgment is necessary to estimate undiscounted future operating cash flows and fair values and, accordingly, actual results could vary significantly from such estimates.  No impairment charges were recognized during the years ended December 31, 2013 and 2012.

INCOME TAXES

The Company accounts for income taxes using the asset and liability method.  This method requires the determination of deferred tax assets and liabilities based on the differences between the financial statement and income tax basis of assets and liabilities, using enacted tax rates.  Additionally, net deferred tax assets are adjusted by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax assets will not be realized.  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 future realization of a portion of its reserved deferred tax assets related to tax benefits associated with the exercise of stock options, if and when realized, will not result in a tax benefit in the statement of income, but rather will result in an increase in additional paid-in capital. The Company will continue to re-assess its reserves on deferred income tax assets in future periods on a quarterly basis.

EARNINGS PER SHARE

The Company displays earnings per share in accordance with ASC 260, Earnings Per Share (“ASC 260”).  ASC 260 requires dual presentation of basic and diluted earnings per share (“EPS”).  Basic earnings per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period.  Diluted earnings per share includes the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

The computation of basic and diluted earnings per share is as follows:

For the year ended December 31, 2013 (in thousands, except per share amounts)

	Net Income		Shares		Per Share
	Numerator		Denominator		Amount
Basic Earnings Per Share
Net income attributable to common stockholders	$	164		12,519	$	0.01
Effect of Dilutive Securities
Options		–		87
Restricted stock		–		29
Diluted Earnings Per Share	$	164		12,635	$	0.01

For the year ended December 31, 2012 (in thousands, except per share amounts)

	Net Income		Shares		Per Share
	Numerator		Denominator		Amount
Basic Earnings Per Share
Net income attributable to common stockholders	$	465		12,321	$	0.04
Effect of Dilutive Securities
Options		–		–
Restricted stock		–		7
Diluted Earnings Per Share	$	465		12,328	$	0.04

Securities that could potentially dilute basic EPS in the future, that were not included in the computation of diluted EPS because to do so would have been anti-dilutive for the periods presented, consist of the following (in thousands):

	December 31,
Anti-Dilutive Potential Common Shares	2013		2012
Options to purchase common stock		333		906
Unvested stock grants		–		53
Total Anti-Dilutive Potential Common Shares		333		959

CASH AND CASH EQUIVALENTS

The Company considers all investments with original maturities of three months or less to be cash equivalents.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

The allowance for doubtful accounts reflects management’s best estimate of probable losses inherent in the accounts receivable balance.  Management determines the allowance based on known troubled accounts, historical experience, and other currently available evidence.  Management performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer's current credit worthiness, as determined by the review of their current credit information.  Collections and payments from customers are continuously monitored.  While such bad debt expenses have historically been within expectations and allowances established, the Company cannot guarantee that it will continue to experience the same credit loss rates that it has in the past.  At December 31, 2013 and 2012, an allowance for doubtful accounts is not provided since, in the opinion of management, all accounts are deemed collectible.  If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, allowances may be required.

STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”).  ASC 718 establishes accounting for stock-based awards exchanged for employee services.  Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period (generally the vesting period of the equity grant) using the straight-line method.

The fair value of the Company’s common stock options are estimated using the Black Scholes-Merton option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate; and the expected life.  The Company calculates the expected volatility using the historical volatility over the most recent period equal to the expected term and evaluates the extent to which available information indicate that future volatility may differ from historical volatility. The expected dividend rate is zero as the Company does not expect to pay or declare any cash dividends on common stock. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant.

The Company has not experienced significant exercise activity on stock options. The Company determines the expected term of its stock option awards issued using the simplified method.  The simplified method assumes each vesting tranche of the award has a term equal to the midpoint between when the award vests and when the award expires.

In accordance with ASC 718, excess tax benefits realized from the exercise of stock-based awards are classified in cash flows from financing activities.  The future realization of the reserved deferred tax assets related to these tax benefits associated with the exercise of stock options will result in a credit to additional paid-in capital if the related tax deduction reduces taxes payable.  The Company has elected the “with and without approach” regarding ordering of windfall tax benefits to determine whether the windfall tax benefit did reduce taxes payable in the current year.  Under this approach, the windfall tax benefit would be recognized in additional paid-in-capital only if an incremental tax benefit is realized after considering all other benefits presently available.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of the Company’s accounts receivable and accounts payable approximates their fair value due to the short-term maturity of such instruments.  The carrying value of capital lease obligations and notes payable approximate their fair value because the terms of these instruments approximate prevailing market rates.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable.  The Company has cash deposits in excess of the maximum amounts insured by FDIC at December 31, 2013.

The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers.  Concentrations of credit risk with respect to accounts receivable and revenue are disclosed in Note 9.

RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS

Management does not believe that any recently issued, but not yet effective accounting standards, if currently adopted, would have a material effect on the financial statements.

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INCOME TAXES (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
INCOME TAXES [Abstract]
Unrecognized tax benefits, interest and penalties	$ 0	$ 0
Unrecognized tax benefits	0	0
Period for which the position in unrecognized tax benefit is not expected to change	12 months
Current [Abstract]
Federal	0	(30,000)
State and other	22,000	3,000
Total Current	22,000	(27,000)
Deferred [Abstract]
Federal	(15,000)	(125,000)
State and other	(3,000)	(22,000)
Total Deferred	(18,000)	(147,000)
Provision for (Benefit from) Income Taxes	4,000	(174,000)
Significant difference between U.S. Federal statutory tax rate and effective tax rate for financial statement [Abstract]
U.S. Federal Statutory Tax Rate (in hundredths)	34.00%	34.00%
Permanent items (in hundredths)	13.00%	9.00%
State taxes (in hundredths)	5.00%	3.00%
Other (in hundredths)	0.00%	(2.00%)
Decrease in valuation allowance	(50.00%)	(104.00%)
Totals (in hundredths)	2.00%	(60.00%)
Deferred Tax Assets [Abstract]
Net operating loss carryforwards	9,670,000	9,816,000
Tax credit carryforwards	347,000	347,000
Fixed and intangible assets	43,000	30,000
Deferred revenue	0	1,000
Value of stock options and stock compensation	338,000	298,000
Deferred rent	9,000	8,000
Capital loss carryforward	517,000	517,000
Accruals	142,000	114,000
Deferred Tax Assets, Gross	11,066,000	11,131,000
Valuation Allowance	(9,874,000)	(9,957,000)
Deferred Tax Assets, Net	1,192,000	1,174,000
Change in valuation allowance for deferred tax assets [Abstract]
Beginning Balance	9,957,000	13,827,000
Change in Allowance	(83,000)	(3,870,000)
Ending Balance	9,874,000	9,957,000
Operating Loss Carryforwards [Line Items]
Amount of federal net operating loss expired	0	9,100,000
Operating loss carryforwards, expiration dates	2019 through 2033
Net operating loss carryforwards related to tax benefit	1,193,000
Federal Tax Authority [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	26,000,000
State Tax Authority [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	$ 20,000,000

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BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 1,371	$ 1,098
Accounts receivable	1,522	1,689
Prepaid expenses and other current assets	368	261
Deferred tax assets - current	318	305
Total current assets	3,579	3,353
Property and equipment, net	852	615
Deferred tax assets	874	869
Other assets	257	324
Total assets	5,562	5,161
Current liabilities:
Accounts payable and accrued expenses	1,402	1,165
Current portion of capital lease obligations	187	198
Notes payable	0	32
Deferred rent	23	22
Deferred revenue	0	41
Total current liabilities	1,612	1,458
Capital lease obligations, net of current portion	36	162
Total liabilities	1,648	1,620
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.0001 par value; 2,000,000 shares authorized; none issued or outstanding	0	0
Common stock, $0.0001 par value; 50,000,000 shares authorized; 12,687,921 and 12,507,870 shares issued and 12,647,994 and 12,467,943 shares outstanding in 2013 and 2012, respectively	1	1
Additional paid-in capital	115,982	115,773
Accumulated deficit	(111,741)	(111,905)
Common stock in treasury, at cost; 24,371 shares in 2013 and 2012	(328)	(328)
Total stockholders' equity	3,914	3,541
Total liabilities and stockholders' equity	$ 5,562	$ 5,161

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STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Cash flows from operating activities:
Net income	$ 164	$ 465
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation	394	375
Deferred taxes	(18)	(147)
Stock-based compensation expense	189	163
Deferred rent expense	1	(8)
Gain on sale of property and equipment	(8)	0
Changes in operating assets and liabilities:
Accounts receivable	167	(121)
Prepaid expenses and other current assets	9	(104)
Accounts payable and accrued expenses	208	58
Deferred revenue	(41)	41
Total adjustments	901	257
Net cash provided by operating activities	1,065	722
Cash flows from investing activities:
Purchases of property and equipment	(121)	(70)
Capitalization of internally developed software	(433)	0
Proceeds from the sale of property and equipment	8	0
Net cash used in investing activities	(546)	(70)
Cash flows from financing activities:
Repayment of long-term debt	(32)	(63)
Repayment of capital lease obligations	(214)	(178)
Net cash used in financing activities	(246)	(241)
Net increase in cash and cash equivalents	273	411
Cash and cash equivalents - beginning	1,098	687
Cash and cash equivalents - ending	1,371	1,098
Supplemental disclosure of cash flow information:
Cash paid for interest	19	11
Cash paid for income taxes	21	8
Schedule of non-cash investing and financing activities:
Issuance of common stock in settlement of accrued directors' fees	20	277
Equipment acquired by capital lease	$ 77	$ 155

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STOCKHOLDERS' EQUITY (Tables)

12 Months Ended

Dec. 31, 2013

STOCKHOLDERS' EQUITY [Abstract]

Stock Option Activity

The following is a summary of stock option activity for the year ended December 31, 2013, relating to all of the Company’s common stock plans (share amounts are in thousands):

						Weighted Average
				Weighted		Remaining
	Shares			Average Exercise		Contractual Term		Aggregate Intrinsic Value
	(in thousands)			Price		(in years)		(in thousands)
Outstanding at January 1, 2013		906		$	1.17		3.90	$	--
Granted		361		$	1.51			$	2
Expired		(57	)	$	1.43			$	1
Exercised		(173	)	$	1.15			$	19
Forfeited		(237	)	$	1.14			$	26
Outstanding at December 31, 2013		800		$	1.31		3.77	$	57
Exercisable at December 31, 2013		188		$	1.16		3.06	$	19

Stock Options Granted Assumptions

The fair values of the stock options granted were estimated on the date of grant using the Black-Scholes-Merton option-pricing model that uses the following weighted-average assumptions for the years ended December 31, 2013 and 2012:

	2013			2012
Expected term	3.75 years			3.75 years
Expected volatility		91% - 97	%		154% - 175	%
Expected dividend yield		--			--
Risk-free interest rate		0.6% - 0.8	%		0.36% - 0.74	%

Stock Option Information

The following table summarizes stock option information as of December 31, 2013:

				Weighted Average
		Number Outstanding		Remaining	Options Exercisable
Exercise Prices		(in thousands)		Contractual Life	(in thousands)
$	1.15		498	3.29 years		157
$	1.20		31	2.48 years		31
$	1.50		80	4.97 years		-
$	1.65		191	4.74 years		-
Total			800	3.77 years		188

Non-vested Stock Grants

A summary of activity related to the Company’s non-vested stock grants for the year ended December 31, 2013 is presented below:

Non-Vested Shares	Shares (in thousands)			Weighted-Average Grant Date Fair Value
Non-Vested at January 1, 2013		60		$	0.66
Granted		98		$	0.82
Vested		(109	)	$	0.73
Non-Vested at December 31, 2013		49		$	0.82

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COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2013

COMMITMENTS AND CONTINGENCIES [Abstract]

Future Minimum Lease Payments Under Operating Leases

At December 31, 2013, the future minimum lease payments under operating leases are summarized as follows:

Year Ending December 31,	Amount
2014	$	533,000
2015		503,000
2016		109,000
2017		112,000
2018		77,000
Total	$	1,334,000

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NATURE OF BUSINESS

12 Months Ended

Dec. 31, 2013

NATURE OF BUSINESS [Abstract]

NATURE OF BUSINESS

NOTE 1 – NATURE OF BUSINESS

Direct Insite Corp. (“Direct Insite” or the “Company”) operates as a Software as a Service provider (“SaaS”), providing financial supply chain automation and workflow efficiencies within the Procure-to-Pay and Order-to-Cash processes. Specifically, Direct Insite’s global electronic invoice (“e-invoice”) management services automate complex manual business processes such as invoice validation, order matching, consolidation, dispute handling, and e-payment processing in a business-to-business transaction based “fee for services” business model.

The Company’s revenue comes from (i) recurring, on-going services that are billed monthly and (ii) non-recurring, professional services derived from the configuration of the Company’s software platform.

Throughout the year, the Company operated redundant data centers in Miami, Florida, and Santa Clara, California.

As described in Note 9, the Company has two major customers (one of which has separate contracts with multiple companies) that accounted for 77.4% and 82.4% of the Company’s revenue for the years ended December 31, 2013 and 2012, respectively.  Loss of either of these customers, or any of the separate contracts under a main customer, could have a material effect on the Company.

In February 2013, the Company was notified by HP Enterprise Services (“HP”), that one of its customers (“HP Customer A”) was terminating its contract effective March 31, 2013.  Despite the Company’s efforts to negotiate a direct contractual agreement with this customer, HP Customer A ultimately decided to sunset its use of the Company’s services. As such, the Company did not record any revenue from HP Customer A after June 30, 2013.  This customer comprised 8.5% of the Company’s revenues for the year ended December 31, 2013, and 13.9% for the year ended December 31, 2012. See Note 9.

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BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Stockholders' equity:
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, authorized (in shares)	2,000,000	2,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, authorized (in shares)	50,000,000	50,000,000
Common stock, issued (in shares)	12,687,921	12,507,870
Common stock, outstanding (in shares)	12,647,994	12,467,943
Treasury stock, at cost (in shares)	24,371	24,371

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

USE OF ESTIMATES

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 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.  The most significant estimates are used in the accounting related to stock based compensation, the valuation allowance on deferred tax assets and capitalized internally developed software.

Actual results could differ from those estimates.

REVENUE RECOGNITION

REVENUE RECOGNITION

The Company records revenue in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition (“ASC 605”), and SEC Staff Accounting Bulletin Topic 13, Revenue Recognition in Financial Statements.  Revenue is recognized when it is both earned and realizable, that is, when the following criteria are met:

• persuasive evidence of arrangements exist;

• delivery has occurred or services have been rendered;

• the seller’s price is fixed and determinable; and

• collectability is reasonably assured.

The following are the specific revenue recognition policies for each major category of revenue.

Recurring (Ongoing Services)

The Company provides transactional data processing services through its SaaS software solutions to its customers.  The customer is charged a monthly fixed rate on a per transaction basis or a fixed fee based on monthly transaction volumes. Revenue is recognized as the services are provided.

Non-Recurring (Professional Services)

The Company provides non-recurring engineering services to its customers, which may include initial or additional development, modification, and customization services to the Company’s software platform.  Such services are billed based on: (i) hourly rates; or (ii) milestone billings.  For hourly billed services, revenue is recognized when work is performed.  For milestone billed services, revenue is recognized when the project milestone has been accepted by the customer.  The Company does not sell software licenses, upgrades or enhancements, or post-contract customer services.

COST OF REVENUE

OF REVENUE

Cost of revenue in the statements of income is included in operations, research and development costs and exclusive of amortization and depreciation which is shown separately.  Professional Service costs related to uncompleted milestones are deferred and included in other current assets, when applicable.

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the related assets.  Leasehold improvements are amortized over the terms of the respective leases or the service lives of the related assets, whichever is shorter.

Capitalized lease assets are amortized over the shorter of the lease term or the service life of the related assets.

INTERNALLY DEVELOPED SOFTWARE

INTERNALLY DEVELOPED SOFTWARE

The Company is in the process of developing a next generation version of its accounts receivable platform. It is being designed for one of the Company’s clients and will be available to all order-to-cash process customers. According to ASC 350-40, Intangibles-Goodwill and Other-Internal-Use Software, the Company capitalizes the costs associated with the application development stage of a project. The Company will start amortizing capitalized costs when the software is ready for use and placed in service. The capitalized costs will be amortized on a straight-line basis over the estimated three year useful life of the software.

IMPAIRMENT OF LONG-LIVED ASSETS

IMPAIRMENT OF LONG-LIVED ASSETS

ASC 360, Property, Plant and Equipment (“ASC 360”) requires management judgments regarding the future operating and disposition plans for marginally performing assets, and estimates of expected realizable values for assets to be sold.  The Company accounts for its long-lived assets in accordance with ASC 360 for purposes of determining and measuring impairment.  It is the Company’s policy to review the value assigned to its long lived assets, to determine if they have been permanently impaired by adverse conditions whenever events or circumstances indicate the related carrying amount may not be recoverable.  If required, an impairment charge would be recorded based on an estimate of future discounted cash flows.  In order to test for recoverability, the Company would compare the sum of an undiscounted cash flow projection from the related long-lived assets to the net carrying amount of such assets.  Considerable management judgment is necessary to estimate undiscounted future operating cash flows and fair values and, accordingly, actual results could vary significantly from such estimates.  No impairment charges were recognized during the years ended December 31, 2013 and 2012.

INCOME TAXES

INCOME TAXES

The Company accounts for income taxes using the asset and liability method.  This method requires the determination of deferred tax assets and liabilities based on the differences between the financial statement and income tax basis of assets and liabilities, using enacted tax rates.  Additionally, net deferred tax assets are adjusted by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax assets will not be realized.  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 future realization of a portion of its reserved deferred tax assets related to tax benefits associated with the exercise of stock options, if and when realized, will not result in a tax benefit in the statement of income, but rather will result in an increase in additional paid-in capital. The Company will continue to re-assess its reserves on deferred income tax assets in future periods on a quarterly basis.

EARNINGS PER SHARE

EARNINGS PER SHARE

The Company displays earnings per share in accordance with ASC 260, Earnings Per Share (“ASC 260”).  ASC 260 requires dual presentation of basic and diluted earnings per share (“EPS”).  Basic earnings per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period.  Diluted earnings per share includes the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

The computation of basic and diluted earnings per share is as follows:

For the year ended December 31, 2013 (in thousands, except per share amounts)

	Net Income		Shares		Per Share
	Numerator		Denominator		Amount
Basic Earnings Per Share
Net income attributable to common stockholders	$	164		12,519	$	0.01
Effect of Dilutive Securities
Options		–		87
Restricted stock		–		29
Diluted Earnings Per Share	$	164		12,635	$	0.01

For the year ended December 31, 2012 (in thousands, except per share amounts)

	Net Income		Shares		Per Share
	Numerator		Denominator		Amount
Basic Earnings Per Share
Net income attributable to common stockholders	$	465		12,321	$	0.04
Effect of Dilutive Securities
Options		–		–
Restricted stock		–		7
Diluted Earnings Per Share	$	465		12,328	$	0.04

Securities that could potentially dilute basic EPS in the future, that were not included in the computation of diluted EPS because to do so would have been anti-dilutive for the periods presented, consist of the following (in thousands):

	December 31,
Anti-Dilutive Potential Common Shares	2013		2012
Options to purchase common stock		333		906
Unvested stock grants		–		53
Total Anti-Dilutive Potential Common Shares		333		959

CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS

The Company considers all investments with original maturities of three months or less to be cash equivalents.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

ALLOWANCE FOR DOUBTFUL ACCOUNTS

The allowance for doubtful accounts reflects management’s best estimate of probable losses inherent in the accounts receivable balance.  Management determines the allowance based on known troubled accounts, historical experience, and other currently available evidence.  Management performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer's current credit worthiness, as determined by the review of their current credit information.  Collections and payments from customers are continuously monitored.  While such bad debt expenses have historically been within expectations and allowances established, the Company cannot guarantee that it will continue to experience the same credit loss rates that it has in the past.  At December 31, 2013 and 2012, an allowance for doubtful accounts is not provided since, in the opinion of management, all accounts are deemed collectible.  If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, allowances may be required.

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”).  ASC 718 establishes accounting for stock-based awards exchanged for employee services.  Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period (generally the vesting period of the equity grant) using the straight-line method.

The fair value of the Company’s common stock options are estimated using the Black Scholes-Merton option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate; and the expected life.  The Company calculates the expected volatility using the historical volatility over the most recent period equal to the expected term and evaluates the extent to which available information indicate that future volatility may differ from historical volatility. The expected dividend rate is zero as the Company does not expect to pay or declare any cash dividends on common stock. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant.

The Company has not experienced significant exercise activity on stock options. The Company determines the expected term of its stock option awards issued using the simplified method.  The simplified method assumes each vesting tranche of the award has a term equal to the midpoint between when the award vests and when the award expires.

In accordance with ASC 718, excess tax benefits realized from the exercise of stock-based awards are classified in cash flows from financing activities.  The future realization of the reserved deferred tax assets related to these tax benefits associated with the exercise of stock options will result in a credit to additional paid-in capital if the related tax deduction reduces taxes payable.  The Company has elected the “with and without approach” regarding ordering of windfall tax benefits to determine whether the windfall tax benefit did reduce taxes payable in the current year.  Under this approach, the windfall tax benefit would be recognized in additional paid-in-capital only if an incremental tax benefit is realized after considering all other benefits presently available.

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of the Company’s accounts receivable and accounts payable approximates their fair value due to the short-term maturity of such instruments.  The carrying value of capital lease obligations and notes payable approximate their fair value because the terms of these instruments approximate prevailing market rates.

CONCENTRATION OF CREDIT RISK

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable.  The Company has cash deposits in excess of the maximum amounts insured by FDIC at December 31, 2013.

The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers.  Concentrations of credit risk with respect to accounts receivable and revenue are disclosed in Note 9.

RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS

RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS

Management does not believe that any recently issued, but not yet effective accounting standards, if currently adopted, would have a material effect on the financial statements.

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Mar. 15, 2014	Jun. 30, 2013
Document and Entity Information [Abstract]
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			$ 8,969,843
Entity Common Stock, Shares Outstanding		12,723,460
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2013

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Computation of basic and diluted earnings per share

The computation of basic and diluted earnings per share is as follows:

For the year ended December 31, 2013 (in thousands, except per share amounts)

	Net Income		Shares		Per Share
	Numerator		Denominator		Amount
Basic Earnings Per Share
Net income attributable to common stockholders	$	164		12,519	$	0.01
Effect of Dilutive Securities
Options		–		87
Restricted stock		–		29
Diluted Earnings Per Share	$	164		12,635	$	0.01

For the year ended December 31, 2012 (in thousands, except per share amounts)

	Net Income		Shares		Per Share
	Numerator		Denominator		Amount
Basic Earnings Per Share
Net income attributable to common stockholders	$	465		12,321	$	0.04
Effect of Dilutive Securities
Options		–		–
Restricted stock		–		7
Diluted Earnings Per Share	$	465		12,328	$	0.04

Antidilutive securities excluded from computation of earnings per share

Securities that could potentially dilute basic EPS in the future, that were not included in the computation of diluted EPS because to do so would have been anti-dilutive for the periods presented, consist of the following (in thousands):

	December 31,
Anti-Dilutive Potential Common Shares	2013		2012
Options to purchase common stock		333		906
Unvested stock grants		–		53
Total Anti-Dilutive Potential Common Shares		333		959

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STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Revenues:
Recurring	$ 7,426	$ 7,374
Non-recurring	1,555	1,440
Total revenues	8,981	8,814
Operating costs and expenses:
Operations, research and development	3,626	3,783
Sales and marketing	2,360	2,365
General and administrative	2,451	1,965
Amortization and depreciation	394	375
Total operating costs and expenses	8,831	8,488
Operating income	150	326
Other income (expense)	18	(35)
Income before provision for income taxes	168	291
Provision for (benefit from) income taxes	4	(174)
Net income	$ 164	$ 465
Basic income per share attributable to common stockholders (in dollars per share)	$ 0.01	$ 0.04
Diluted income per share attributable to common stockholders (in dollars per share)	$ 0.01	$ 0.04
Basic weighted average common shares outstanding (in shares)	12,519	12,321
Diluted weighted average common shares outstanding (in shares)	12,635	12,328

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STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2013

STOCKHOLDERS' EQUITY [Abstract]

SHAREHOLDERS' EQUITY

NOTE 6 – STOCKHOLDERS’ EQUITY

PREFERRED STOCK

The Company has 2,000,000 authorized preferred shares of which none were issued and outstanding at December 31, 2013 and 2012.

COMMON STOCK, OPTIONS AND STOCK GRANTS

Year Ended December 31, 2013

During the year ended December 31, 2013, 98,000 restricted common shares were granted with an aggregate grant date fair value of approximately $80,000.  During the year ended December 31, 2013, approximately 109,000 restricted common shares with an aggregate grant date fair value of approximately $80,000 vested.

During the year ended December 31, 2013, the Company issued 55,181 shares of restricted common stock with a grant date fair value of approximately $42,000, pursuant to the Company’s Directors’ Deferred Compensation Plan dated January 1, 2008 (the “Directors’ Deferred Compensation Plan”), to a former director for past services. 20,595 of the 55,181 shares of restricted common stock were issued to settle approximately by $20,000 of accrued directors’ fees recorded on the Company’s balance sheet.

During the year ended December 31, 2013, the Company granted, to employees of the Company, options to acquire 360,909 shares of common stock with exercise prices of $1.15 (for a grant of 15,000 options), $1.25 per share (for grants of 75,000 options), $1.50 (for a grant of 80,000 options), and $1.65 per share (for grants of 190,909 options), 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 grant date fair value of the stock options issued was determined to be approximately $330,000.  During the year ended December 31, 2013, the Company recognized approximately $109,000 of expense related to the vesting of outstanding stock options.  For the year ended December 31, 2013, options to acquire 56,500 shares of common stock with a weighted average exercise price of $1.43 expired unexercised, and options to acquire 236,875 shares of common stock with a weighted average exercise price of $1.14 were forfeited. On September 5, 2013, Matthew E. Oakes, the Company’s President and Chief Executive Officer, received 50,348 shares of the Company’s common stock in a cashless exercise of 172,500 stock options that had an exercise price of $1.15 per share.

Year Ended December 31, 2012

During the year ended December 31, 2012, 150,000 restricted common shares were granted with an aggregate grant date fair value of approximately $99,000.  During the year ended December 31, 2012, 89,607 restricted common shares with an aggregate grant date fair value of approximately $65,000 vested, and 35,000 of unvested restricted common shares with an aggregate grant date fair value of approximately $26,000 were forfeited.

During the year ended December 31, 2012, the Company granted, to certain employees of the Company, options to acquire an aggregate of 875,000 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 grant date fair value of the stock options granted during the year ended December 31, 2012 was determined to be approximately $527,000, of which approximately $98,000 was recognized as stock compensation expense for the year ended December 31, 2012.  During the year ended December 31, 2012, options to acquire 17,000 shares of common stock with a grant date fair value of approximately $12,000 expired unexercised and options to acquire 80,000 shares of common stock with a grant date fair value of approximately $46,000 were forfeited.  On April 5, 2012, the Company issued 261,503 shares of common stock with a grant date fair value of approximately $277,000, pursuant to the Direct Insite Corp. Directors’ Deferred Compensation Plan dated January 1, 2008, to two former Directors for past services.

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.  On April 1, 2013, the Company’s 2003 Stock Option/Stock Issuance Plan and its 2003-A Stock Option/Stock Issuance Plan expired resulting in the expiration of 278,532 and 37,325 options, respectively, available for issuance.  As of December 31, 2013, 12,894 shares were available for issuance under the Company’s 2004 Stock Option/Stock Issuance Plan, its sole remaining plan under which options may be issued.

The following is a summary of stock option activity for the year ended December 31, 2013, relating to all of the Company’s common stock plans (share amounts are in thousands):

						Weighted Average
				Weighted		Remaining
	Shares			Average Exercise		Contractual Term		Aggregate Intrinsic Value
	(in thousands)			Price		(in years)		(in thousands)
Outstanding at January 1, 2013		906		$	1.17		3.90	$	--
Granted		361		$	1.51			$	2
Expired		(57	)	$	1.43			$	1
Exercised		(173	)	$	1.15			$	19
Forfeited		(237	)	$	1.14			$	26
Outstanding at December 31, 2013		800		$	1.31		3.77	$	57
Exercisable at December 31, 2013		188		$	1.16		3.06	$	19

During the year ended December 31, 2013, Company granted approximately 361,000 stock options with weighted average grant date fair values of $0.91 per share.   During the year ended December 31, 2012, Company granted approximately 875,000 stock options with weighted average grant date fair values of $0.60 per share.  The fair values of the stock options granted were estimated on the date of grant using the Black-Scholes-Merton option-pricing model that uses the following weighted-average assumptions for the years ended December 31, 2013 and 2012:

	2013			2012
Expected term	3.75 years			3.75 years
Expected volatility		91% - 97	%		154% - 175	%
Expected dividend yield		--			--
Risk-free interest rate		0.6% - 0.8	%		0.36% - 0.74	%

The following table summarizes stock option information as of December 31, 2013:

				Weighted Average
		Number Outstanding		Remaining	Options Exercisable
Exercise Prices		(in thousands)		Contractual Life	(in thousands)
$	1.15		498	3.29 years		157
$	1.20		31	2.48 years		31
$	1.50		80	4.97 years		-
$	1.65		191	4.74 years		-
Total			800	3.77 years		188

As of December 31, 2013, there was approximately $299,000 of unrecognized compensation costs related to stock options outstanding that will be recognized as expense over a weighted average period of 3.15 years.

RESTRICTED STOCK GRANT

A summary of activity related to the Company’s non-vested stock grants for the year ended December 31, 2013 is presented below:

Non-Vested Shares	Shares (in thousands)			Weighted-Average Grant Date Fair Value
Non-Vested at January 1, 2013		60		$	0.66
Granted		98		$	0.82
Vested		(109	)	$	0.73
Non-Vested at December 31, 2013		49		$	0.82

The future expected expense for non-vested shares is approximately $40,000 and will be recognized on a straight-line basis over the period from January 1, 2014 through December 31, 2014.

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DEBT

12 Months Ended

Dec. 31, 2013

DEBT [Abstract]

DEBT

NOTE 5 – DEBT

NOTES PAYABLE

At December 31, 2012, notes payable consisted of approximately $32,000 of borrowings for the purchase of equipment. These notes, which were paid in full during the year ended December 31, 2013, bore interest at rates ranging from 8.0% to 9.5% per year and matured in August 2013.

CAPITAL LEASE OBLIGATIONS

The Company has equipment under six capital lease obligations expiring at various times through June 2016.  The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair values of the assets.

At December 31, 2013, future minimum payments under these capital leases are:

Year Ending	Amount
December 31	(in thousands)
2014	$	198
2015		31
2016		10
Total minimum lease payments		239
Less: amounts representing interest		(16	)
Net minimum lease payments		223
Current portion		187
Long-term portion	$	36

The implied annual interest rates related to these capital leases range from 0.0% to 9.0%. As of December 31, 2013, the gross book value and the net book value of the related assets included in property and equipment is approximately $646,000 and $241,000, respectively.

Amortization of assets under capital leases is included in depreciation expense.

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

INCOME TAXES [Abstract]

Provision for Current and Deferred Income Tax

The following table summarizes components of the provision for (benefit from) current and deferred income taxes for the years ended December 31, 2013 and 2012:

	2013			2012
	(in thousands)
Current
Federal	$	0		$	(30	)
State and other		22			3
Total Current		22			(27	)
Deferred
Federal		(15	)		(125	)
State and other		(3	)		(22	)
Total Deferred		(18	)		(147	)
Provision for (Benefit from) Income Taxes	$	4		$	(174	)

Significant Differences Between U.S. Federal Statutory Tax Rate and Effective Tax Rate

The following table summarizes the significant differences between the U.S. Federal statutory tax rate and the Company’s effective tax rate for financial statement purposes for the years ended December 31, 2013 and 2012:

	2013			2012
U.S. Federal Statutory Tax Rate		34.0	%		34.0	%
Permanent items		13.0	%		9.0	%
State taxes		5.0	%		3.0	%
Other		0.0	%		(2.0	)%
Decrease in valuation allowance		(50.0)	%		(104.0	)%
Totals		2.0	%		(60.0	)%

Deferred Tax Assets and Liabilities

The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2013 and 2012 are summarized as follows:

	2013			2012
	(in thousands)
Deferred Tax Assets
Net operating loss carryforwards	$	9,670		$	9,816
Tax credit carryforwards		347			347
Fixed and intangible assets		43			30
Deferred revenue		0			1
Value of stock options and stock compensation		338			298
Deferred rent		9			8
Capital loss carryforward		517			517
Accruals		142			114
		11,066			11,131
Valuation Allowance		(9,874	)		(9,957	)
Deferred Tax Assets, Net	$	1,192		$	1,174

Change in Valuation Allowance for Deferred Tax Assets

The change in the valuation allowance for deferred tax assets for the years ended December 31, 2013 and 2012 are summarized as follows:

	2013		2012
Beginning Balance	$	9,957	$	13,827
Change in Allowance		(83)		(3,870	)
Ending Balance	$	9,874	$	9,957

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PROPERTY AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2013

PROPERTY AND EQUIPMENT [Abstract]

Property and Equipment

Property and equipment consist of the following as of December 31, 2013 and 2012:

	2013			2012
Computer equipment and purchased software (3 years)	$	1,361		$	5,056
Internally developed software not yet placed in service    (3 years)		433			–
Furniture and fixtures and leasehold improvements (5 – 7 years)		146			91
		1,940			5,147
Less: accumulated depreciation and amortization		(1,088	)		(4,532	)
Property and equipment, net	$	852		$	615

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MAJOR CUSTOMERS

12 Months Ended

Dec. 31, 2013

MAJOR CUSTOMERS [Abstract]

MAJOR CUSTOMERS

NOTE 9 – MAJOR CUSTOMERS

Two customers, HP Enterprise Services (“HP”) and International Business Machines Corp. (“IBM”), accounted for a significant portion of the Company’s revenues as follows:

	% of Total Revenues Year Ended December 31,
	2013			2012
HP Customer A		8.5	%		13.9	%
HP Customer B		13.8			14.6
HP Customer C		12.2			15.1
HP Customer D		10.6			5.5
Total HP		45.1	%		49.1	%
IBM		32.3			33.3
Total Major Customers		77.4	%		82.4	%
Others		22.6			17.6
Total		100.0	%		100.0	%

As of December 31, 2013 and 2012, HP and IBM accounted for a significant portion of the Company’s accounts receivable as follows (in thousands):

	December 31,
	2013		2012
Total HP	$	519	$	827
IBM		505		552
Total	$	1,024	$	1,379

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INCOME TAXES

12 Months Ended

Dec. 31, 2013

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 7 – INCOME TAXES

The Company accounts for income taxes in accordance with ASC 740 which prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim period, disclosure and transition.  There were no unrecognized tax benefits as of December 31, 2013 and 2012.

The Company has identified its federal tax return and its state tax return in Florida as “major” tax jurisdictions, as defined in ASC 740, Income Taxes.  Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements.  The Company’s evaluation was performed for tax years ended 2010 through 2013, the only periods subject to examination.  The Company believes that its income tax positions and deductions will be sustained upon audit and does not anticipate any adjustments that will result in a material change to its financial position.  The Company has elected to classify interest and penalties incurred on income taxes, if any, as income tax expense.  No interest or penalties on income taxes have been recorded during the years ended December 31, 2013 and 2012.  The Company does not expect its unrecognized tax benefit position to change during the next twelve months.  Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

The following table summarizes components of the provision for (benefit from) current and deferred income taxes for the years ended December 31, 2013 and 2012:

	2013			2012
	(in thousands)
Current
Federal	$	0		$	(30	)
State and other		22			3
Total Current		22			(27	)
Deferred
Federal		(15	)		(125	)
State and other		(3	)		(22	)
Total Deferred		(18	)		(147	)
Provision for (Benefit from) Income Taxes	$	4		$	(174	)

The following table summarizes the significant differences between the U.S. Federal statutory tax rate and the Company’s effective tax rate for financial statement purposes for the years ended December 31, 2013 and 2012:

	2013			2012
U.S. Federal Statutory Tax Rate		34.0	%		34.0	%
Permanent items		13.0	%		9.0	%
State taxes		5.0	%		3.0	%
Other		0.0	%		(2.0	)%
Decrease in valuation allowance		(50.0)	%		(104.0	)%
Totals		2.0	%		(60.0	)%

The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2013 and 2012 are summarized as follows:

	2013			2012
	(in thousands)
Deferred Tax Assets
Net operating loss carryforwards	$	9,670		$	9,816
Tax credit carryforwards		347			347
Fixed and intangible assets		43			30
Deferred revenue		0			1
Value of stock options and stock compensation		338			298
Deferred rent		9			8
Capital loss carryforward		517			517
Accruals		142			114
		11,066			11,131
Valuation Allowance		(9,874	)		(9,957	)
Deferred Tax Assets, Net	$	1,192		$	1,174

The change in the valuation allowance for deferred tax assets for the years ended December 31, 2013 and 2012 are summarized as follows:

	2013		2012
Beginning Balance	$	9,957	$	13,827
Change in Allowance		(83)		(3,870	)
Ending Balance	$	9,874	$	9,957

At December 31, 2013, the Company has federal and state net operating loss carryforwards (“NOLs”) remaining of approximately $26 million and $20 million, respectively, which may be available to reduce taxable income, if any.  Approximately $0 and $9.1 million of federal NOLs expired in 2013 and 2012, respectively.  Remaining federal and state net operating loss carryforwards expire from 2019 through 2033.  However, Internal Revenue Code Section 382 rules limit the utilization of NOLs upon an ownership change of a company.  During 2013, the Company performed an evaluation as to whether an ownership change had taken place.  Management believes that there has been no ownership change as such applies to Section 382.  However, if it is determined that an ownership change has taken place, either historically or in the future, utilization of its NOLs will be subject to limitations, which could eliminate a substantial portion of the future income tax benefits of the NOLs.  The NOL carryforward as of December 31, 2013 included approximately $1,193,000 related to windfall tax benefits for which a benefit would be recorded in additional paid-in capital if and when realized.

During 2013, the Company reviewed previous positive and negative evidence and also reviewed its expected taxable income for future periods and concluded it is more likely than not that approximately $1,192,000 of tax benefits relating to NOLs will be utilized.  Accordingly, the Company recorded a tax benefit in the amount of $18,000 during the year ended December 31, 2013, reflecting the change from December 31, 2012.

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2013

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 8 – COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

Operating leases are primarily for office space, data centers, equipment and automobiles.

On October 24, 2012, the Company entered into a 66-month lease for 5,806 square feet of office space in downtown Ft. Lauderdale, Florida. The Company relocated its corporate headquarters from Sunrise, Florida to the new location upon the termination of the lease in February 2013.

At December 31, 2013, the future minimum lease payments under operating leases are summarized as follows:

Year Ending December 31,	Amount
2014	$	533,000
2015		503,000
2016		109,000
2017		112,000
2018		77,000
Total	$	1,334,000

Rent expense approximated $558,000 and $529,000 for the years ended December 31, 2013 and 2012, respectively.

EMPLOYMENT AGREEMENTS

The Company has an employment agreement with Mr. Oakes for a term effective June 1, 2013 through December 31, 2015.  The agreement provides for a base salary of $24,583 per month for 2014 and 2015, annual incentive bonuses based on the Company’s performance in achieving prescribed revenue and earnings before interest and taxes (“EBIT”) targets, and discretionary bonuses.  The agreement also provides for reimbursement of all out-of-pocket expenses reasonably incurred by him in the performance of his duties hereunder and certain severance benefits in the event of termination prior to the expiration date.  If Mr. Oakes is terminated without cause or resigns from employment for “good reason” (as defined within Mr. Oakes’ employment agreement), he would receive one-year of base salary and COBRA coverage at the Company’s expense for the number of months he receives severance payments.

The Company shall continue to make lease payments on the corporate apartment located in Ft. Lauderdale, Florida and utilized by Mr. Oakes through the date of termination of such lease on December 31, 2015, in lieu of the Company’s reimbursement of up to $25,000 of relocation expenses as originally provided in the Agreement.

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2013

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS

NOTE 10 – SUBSEQUENT EVENTS

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

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MAJOR CUSTOMERS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
MAJOR CUSTOMERS [Abstract]
Number of major customers	2
Revenues [Member]
Summary of customers accounted for significant portion of revenues [Abstract]
Major customer, revenues (in hundredths)	100.00%	100.00%
Accounts Receivable [Member]
Summary of customers accounted for significant portion of accounts receivable [Abstract]
Major customer, accounts receivable	$ 1,024	$ 1,379
HP Customer A [Member] | Revenues [Member]
Summary of customers accounted for significant portion of revenues [Abstract]
Major customer, revenues (in hundredths)	8.50%	13.90%
HP Customer B [Member] | Revenues [Member]
Summary of customers accounted for significant portion of revenues [Abstract]
Major customer, revenues (in hundredths)	13.80%	14.60%
HP Customer C [Member] | Revenues [Member]
Summary of customers accounted for significant portion of revenues [Abstract]
Major customer, revenues (in hundredths)	12.20%	15.10%
HP Customer D [Member] | Revenues [Member]
Summary of customers accounted for significant portion of revenues [Abstract]
Major customer, revenues (in hundredths)	10.60%	5.50%
Total HP [Member] | Revenues [Member]
Summary of customers accounted for significant portion of revenues [Abstract]
Major customer, revenues (in hundredths)	45.10%	49.10%
Total HP [Member] | Accounts Receivable [Member]
Summary of customers accounted for significant portion of accounts receivable [Abstract]
Major customer, accounts receivable	519	827
IBM [Member] | Revenues [Member]
Summary of customers accounted for significant portion of revenues [Abstract]
Major customer, revenues (in hundredths)	32.30%	33.30%
IBM [Member] | Accounts Receivable [Member]
Summary of customers accounted for significant portion of accounts receivable [Abstract]
Major customer, accounts receivable	$ 505	$ 552
Total Major Customers [Member] | Revenues [Member]
Summary of customers accounted for significant portion of revenues [Abstract]
Major customer, revenues (in hundredths)	77.40%	82.40%
Others [Member] | Revenues [Member]
Summary of customers accounted for significant portion of revenues [Abstract]
Major customer, revenues (in hundredths)	22.60%	17.60%

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DEBT (Tables)

12 Months Ended

Dec. 31, 2013

DEBT [Abstract]

Future Minimum Payments Under Capital Leases

At December 31, 2013, future minimum payments under these capital leases are:

Year Ending	Amount
December 31	(in thousands)
2014	$	198
2015		31
2016		10
Total minimum lease payments		239
Less: amounts representing interest		(16	)
Net minimum lease payments		223
Current portion		187
Long-term portion	$	36

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NATURE OF BUSINESS (Details)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Concentration Risk [Line Items]
Number of major customers	2
Revenues [Member] | Customers One [Member]
Concentration Risk [Line Items]
Ratio of revenues from major customers to total revenues (in hundredths)	77.40%	82.40%
Revenues [Member] | Customers Two [Member]
Concentration Risk [Line Items]
Ratio of revenues from major customers to total revenues (in hundredths)	8.50%	13.90%

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STATEMENT OF STOCKHOLDERS' EQUITY (USD $)	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Treasury Stock [Member]	Total
Balance at Dec. 31, 2011	$ 1,000	$ 115,333,000	$ (112,370,000)	$ (328,000)	$ 2,636,000
Balance (in shares) at Dec. 31, 2011	12,117,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock in settlement of accrued directors' fees	0	277,000	0	0	277,000
Issuance of common stock in settlement of accrued directors' fees (in shares)	261,000
Employee stock based compensation expense	0	98,000	0	0	98,000
Employee stock based compensation expense (in shares)	0
Common stock issued or issuable for directors' fees	0	65,000	0	0	65,000
Common stock issued or issuable for directors' fees (in shares)	90,000
Net income	0	0	465,000	0	465,000
Balance at Dec. 31, 2012	1,000	115,773,000	(111,905,000)	(328,000)	3,541,000
Balance (in shares) at Dec. 31, 2012	12,468,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock in settlement of accrued directors' fees	0	20,000	0	0	20,000
Issuance of common stock in settlement of accrued directors' fees (in shares)	21,000
Common stock issued on cashless exercise of options	0	0	0	0	0
Common stock issued on cashless exercise of options (in shares)	50,000
Employee stock based compensation expense	0	109,000	0	0	109,000
Employee stock based compensation expense (in shares)	0
Common stock issued or issuable for directors' fees	0	80,000	0	0	80,000
Common stock issued or issuable for directors' fees (in shares)	109,000
Net income	0	0	164,000	0	164,000
Balance at Dec. 31, 2013	$ 1,000	$ 115,982,000	$ (111,741,000)	$ (328,000)	$ 3,914,000
Balance (in shares) at Dec. 31, 2013	12,648,000

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES

12 Months Ended

Dec. 31, 2013

ACCOUNTS PAYABLE AND ACCRUED EXPENSES [Abstract]

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following as of December 31, 2013 and 2012:

	2013		2012
	(in thousands)
Trade accounts payable	$	324	$	141
Sales taxes payable		539		539
Accrued directors’ fees		377		261
Other accrued expenses		162		224
Total Accounts Payable and Accrued Expenses	$	1,402	$	1,165

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) Share data in Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
IMPAIRMENT OF LONG-LIVED ASSETS [Abstract]
Impairment charges	$ 0	$ 0
Net Income Numerator [Abstract]
Net income attributable to common stockholders	164,000	465,000
Diluted Earnings Per Share	164,000	465,000
Shares Denominator [Abstract]
Net income attributable to common stockholders (in shares)	12,519	12,321
Diluted Earnings Per Share (in shares)	12,635	12,328
Per Share Amount [Abstract]
Net income attributable to common stockholders (in dollars per share)	$ 0.01	$ 0.04
Diluted Earnings Per Share (in dollars per share)	$ 0.01	$ 0.04
Summary of antidilutive securities excluded from computation of earnings per share [Abstract]
Total Anti-Dilutive Potential Common Shares (in shares)	333	959
Stock Options [Member]
Net Income Numerator [Abstract]
Effect of Dilutive Securities	0	0
Shares Denominator [Abstract]
Effect of Dilutive Securities (in shares)	87	0
Summary of antidilutive securities excluded from computation of earnings per share [Abstract]
Total Anti-Dilutive Potential Common Shares (in shares)	333	906
Restricted Stock [Member]
Net Income Numerator [Abstract]
Effect of Dilutive Securities	$ 0	$ 0
Shares Denominator [Abstract]
Effect of Dilutive Securities (in shares)	29	7
Summary of antidilutive securities excluded from computation of earnings per share [Abstract]
Total Anti-Dilutive Potential Common Shares (in shares)	0	53
Internally Developed Software [Member]
Property, Plant and Equipment [Line Items]
Internally developed software, useful life	3 years

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)

12 Months Ended

Dec. 31, 2013

ACCOUNTS PAYABLE AND ACCRUED EXPENSES [Abstract]

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following as of December 31, 2013 and 2012:

	2013		2012
	(in thousands)
Trade accounts payable	$	324	$	141
Sales taxes payable		539		539
Accrued directors’ fees		377		261
Other accrued expenses		162		224
Total Accounts Payable and Accrued Expenses	$	1,402	$	1,165