UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED March 31, 2009

Commission File Number 001-32300

SMARTPROS LTD.(Exact name of small business issuer as specified in its charter)

|Delaware                          |  | 13-4100476         
|--------------------------------- |  | -------------------
|(State or other jurisdiction      |  | (I.R.S. Employer   
|of incorporation or organization) |  | Identification No.)

12 Skyline Drive, Hawthorne, New York 10532(Address of principal executive office)

(914) 345-2620(Issuers telephone number, including area code)

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

Yes |x|      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
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes |  |      No |  |

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes |  |      No |x|

Number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of May 1, 2009, there were 4,995,526 shares of common stock outstanding.

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SMARTPROS LTD.

FORM 10-Q REPORT

March 31, 2009

TABLE OF CONTENTS

|                               |  |                                                                                       |  | PAGE
|------------------------------ |  | ------------------------------------------------------------------------------------- |  | ----
|PART I  FINANCIAL INFORMATION |  |                                                                                      
|                               |  |                                                                                      
|Item 1.                        |  | Condensed Consolidated Financial Statements (Unaudited)                               |  |     
|                               |  |                                                                                       |  |     
|                               |  | Balance Sheets  March 31, 2009 and December 31, 2008 (Audited)                       |  | 3   
|                               |  |                                                                                       |  |     
|                               |  | Statements of Operations for the three-month periods ended March 31, 2009 and 2008    |  | 4   
|                               |  |                                                                                       |  |     
|                               |  | Statements of Cash Flows for the three-month periods ended March 31, 2009 and 2008    |  | 5   
|                               |  |                                                                                       |  |     
|                               |  | Notes to Condensed Consolidated Financial Statements                                  |  | 6   
|                               |  |                                                                                       |  |     
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 9   
|                               |  |                                                                                       |  |     
|Item 3.                        |  | Quantitative and Qualitative Risk Disclosures About Market Risk                       |  | 16  
|                               |  |                                                                                       |  |     
|Item 4T.                       |  | Controls and Procedures                                                               |  | 16  
|                               |  |                                                                                       |  |     
|PART II  OTHER INFORMATION    |  |                                                                                      
|                               |  |                                                                                      
|Item 1.                        |  | Legal Proceedings                                                                     |  | 16  
|                               |  |                                                                                       |  |     
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 16  
|                               |  |                                                                                       |  |     
|Item 3.                        |  | Defaults Upon Senior Securities                                                       |  | 16  
|                               |  |                                                                                       |  |     
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                   |  | 16  
|                               |  |                                                                                       |  |     
|Item 5.                        |  | Other Information                                                                     |  | 17  
|                               |  |                                                                                       |  |     
|Item 6.                        |  | Exhibits                                                                              |  | 17  
|                               |  |                                                                                       |  |     
|SIGNATURES                     |  | 17                                                                                   

FORWARD-LOOKING STATEMENTS

Certain statements made in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934. These
statements relate to the plans and objectives of management for future operations as well as to market trends and expectations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations,
plans and assumptions relating to the future operation of our business. These expectations, plans and assumptions involve judgments with respect to, among other things, future economic, competitive and market conditions and future business
decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that our expectations, plans and assumptions underlying the forward-looking statements are reasonable, they could
prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein,
the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. We undertake no obligation to revise or update publicly any forward-looking statements for any
reason.

The terms we, our, us, or any derivative thereof, as used herein refer to SmartPros Ltd., a Delaware corporation, its subsidiaries and its
predecessors.

2

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PART IFINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

SMARTPROS LTD. AND SUBSIDIARIESCondensed Consolidated Balance Sheets

|                                                                    |  | March 31,   |            | December 31,
|------------------------------------------------------------------- |  | ----------- | ---------- | ------------
|                                                                    |  | 2009        |            | 2008        
|                                                                    |  | (Unaudited) |            | (Audited)   
|ASSETS                                                              |  |             |            |             
|Current Assets:                                                     |  |             |            |             
|Cash and cash equivalents                                           |  | $           | 6,942,433  |             
|Accounts receivable, net of allowance for doubtful accounts         |  |             |            |             
|of $39,627 at March 31, 2009 and $39,677 at December 31, 2008       |  |             | 2,269,897  |             
|Prepaid expenses and other current assets                           |  |             | 226,378    |             
|Total Current Assets                                                |  |             | 9,438,708  |             
|                                                                   
|Property and equipment, net                                         |  |             | 604,746    |             
|Goodwill                                                            |  |             | 3,375,257  |             
|Other intangibles, net                                              |  |             | 4,434,468  |             
|Other assets, including restricted cash of $150,000                 |  |             | 160,626    |             
|Deferred tax asset                                                  |  |             | 1,091,923  |             
|Investment in joint venture, at cost                                |  |             | 23,057     |             
|                                                                    |  |             | 9,690,077  |             
|Total Assets                                                        |  | $           | 19,128,785 |             
|                                                                   
|LIABILITIES AND STOCKHOLDERS EQUITY                                |  |             |            |             
|Current Liabilities:                                                |  |             |            |             
|Accounts payable                                                    |  | $           | 490,588    |             
|Accrued expenses                                                    |  |             | 1,195,963  |             
|Deferred revenue                                                    |  |             | 5,250,189  |             
|Total Current Liabilities                                           |  |             | 6,936,740  |             
|                                                                   
|Long-Term Liabilities:                                              |  |             |            |             
|Other liabilities                                                   |  |             | 7,415      |             
|Total Long-Term Liabilities                                         |  |             | 7,415      |             
|                                                                   
|COMMITMENTS AND CONTINGENCIES                                       |  |             |            |             
|Stockholders Equity:                                               |  |             |            |             
|Convertible preferred stock, $.001 par value, authorized 1,000,000  |  |             | --         |             
|shares, 0 shares issued and outstanding                             |  |             |            |             
|Common stock, $.0001 par value, authorized 30,000,000 shares,       |  |             | 548        |             
|5,478,275 issued and 4,995,526 outstanding at March 31,             |  |             |            |             
|2009; and 5,324,316 issued and 4,841,567outstanding at December 31, |  |             |            |             
|2008                                                                |  |             |            |             
|Additional paid-in capital                                          |  |             | 17,185,486 |             
|Accumulated (deficit)                                               |  |             | (3,475,681 | )           
|Common stock in treasury, at cost  482,749 shares                  |  |             | (1,525,723 | )           
|Total Stockholders Equity                                          |  |             | 12,184,630 |             
|Total Liabilities and Stockholders Equity                          |  | $           | 19,128,785 |             



|See Notes to Condensed Consolidated Financial Statements (Unaudited)
|--------------------------------------------------------------------



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SMARTPROS LTD. AND SUBSIDIARIESCondensed Consolidated Statements of Operations (Unaudited)

|                                                |  | Three Months Ended
|----------------------------------------------- |  | ------------------
|                                                |  | March 31,         
|                                                |  | 2009              
|                                               
|Net revenues                                    |  | $                 
|Cost of revenues                                |  |                   
|Gross profit                                    |  |                   
|                                               
|Operating Expenses:                             |  |                   
|Selling, general and administrative             |  |                   
|Depreciation and amortization                   |  |                   
|                                                |  |                   
|Operating income (loss)                         |  |                   
|                                               
|Other Income (Expense):                         |  |                   
|Interest income (net)                           |  |                   
|Loss from joint venture                         |  |                   
|                                                |  |                   
|                                               
|Income (loss) before provision for income taxes |  |                   
|                                               
|Less: provision for income tax                  |  |                   
|Net income (loss)                               |  | $                 
|                                               
|Net (loss) income per common share:             |  |                   
|Basic net income (loss) per common share        |  | $                 
|                                               
|Diluted net income (loss) per common share      |  | $                 
|                                               
|Weighted Average Number of Shares Outstanding:  |  |                   
|Basic                                           |  |                   
|                                               
|Diluted                                         |  |                   









|See Notes to Condensed Consolidated Financial Statements (Unaudited)
|--------------------------------------------------------------------



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SMARTPROS LTD. AND SUBSIDIARIESCondensed Consolidated Statements of Cash Flows (Unaudited)

|                                                                   |  | Three Months Ended
|------------------------------------------------------------------ |  | ------------------
|                                                                   |  | March 31,         
|                                                                   |  | 2009              
|Cash Flows from Operating Activities:                              |  |                   
|Net income (loss)                                                  |  | $                 
|Adjustments to reconcile net income (loss) to net cash provided by |  |                   
|operating activities:                                              |  |                   
|Depreciation and amortization                                      |  |                   
|Deferred compensation                                              |  |                   
|Stock compensation expense                                         |  |                   
|Deferred income taxes                                              |  |                   
|Loss from joint venture                                            |  |                   
|Changes in operating assets and liabilities:                       |  |                   
|(Increase) decrease in operating assets:                           |  |                   
|Accounts receivable                                                |  |                   
|Prepaid expenses and other current assets                          |  |                   
|Other assets                                                       |  |                   
|(Decrease) increase in operating liabilities:                      |  |                   
|Accounts payable and accrued expenses                              |  |                   
|Deferred revenue                                                   |  |                   
|Other liabilities                                                  |  |                   
|Total adjustments                                                  |  |                   
|Net Cash Provided by Operating Activities                          |  |                   
|                                                                  
|Cash Flows from Investing Activities:                              |  |                   
|Acquisition of property and equipment                              |  |                   
|Acquisition of course content                                      |  |                   
|Capitalized software development                                   |  |                   
|Capitalized course costs                                           |  |                   
|Adjustment to cash paid for goodwill                               |  |                   
|Net Cash Used in Investing Activities                              |  |                   
|                                                                  
|Cash Flows from Financing Activities:                              |  |                   
|Exercise of stock options                                          |  |                   
|Purchase of treasury stock                                         |  |                   
|Net Cash Used in Financing Activities                              |  |                   
|                                                                  
|Net increase (decrease) in cash and cash equivalents               |  |                   
|Cash and cash equivalents, beginning of period                     |  |                   
|Cash and cash equivalents, end of period                           |  | $                 
|                                                                  
|Supplemental Disclosure:                                           |  |                   
|Cash paid for interest                                             |  | $                 
|Cash paid for income taxes                                         |  | $                 



|See Notes to Condensed Consolidated Financial Statements (Unaudited)
|--------------------------------------------------------------------



5

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Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of SmartPros Ltd. and subsidiaries (SmartPros or the Company) have been prepared by the Company in accordance with generally
accepted accounting principles for interim financial information and with instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial
statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the Companys audited consolidated financial statements for the year ended December 31, 2008, and the notes thereto included in the Companys Annual Report on Form 10-K filed with the United States
Securities and Exchange Commission on March 24, 2009. Results of consolidated operations for the interim periods are not necessarily indicative of a full years operating results. The unaudited condensed consolidated financial statements herein
include the accounts of the Company and its wholly owned subsidiaries, SmartPros Legal and Ethics, Ltd. (SLE), Skye Multimedia Ltd. (Skye) and Loscalzo Associates, Ltd. (Loscalzo). All material inter-company
accounts and transactions have been eliminated.

Note 2. Description of Business and Summary of Significant Accounting Policies

Nature of Operations

The Company, a Delaware corporation, was organized in 1981 as Center for Video Education Inc. for the purpose of producing educational videos primarily directed to the accounting profession.
SmartPros primary products today are periodic video and internet subscription services directed to corporate accountants and financial managers, accountants in public practice and CPA exam candidates. In 2008, the Company acquired Loscalzo, a
leading provider of live training to accountants. In addition, the Company also produces a series of continuing education courses directed to the engineering profession, as well as a series of courses designed for candidates for the professional
engineering exam. Through its wholly-owned subsidiary, SLE, the Company produces ethics, governance and compliance programs for corporate clients, and through SLEs Cognistar Legal division, produces online and customized training courses for
the legal profession. The Companys other wholly-owned subsidiary, Skye, produces customized training solutions for a number of industries including the pharmaceutical and professional services. As a result of recent acquisitions, the Company
acquired a library of nationally certified online training solutions for the banking, securities and insurance industries, as well as courses designed for live training. The engineering division provides training courses for the profession and
preparation for professional licensing examinations.

SmartPros also produces custom videos and rents out its studios and provides video duplication and technology consulting services.

While the Companys management monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a company-wide basis.
Accordingly, all of the Companys operations are considered to be aggregated in one reportable segment.

SmartPros is located in Hawthorne, New York, where it maintains its corporate offices, new media lab, video production studios and tape duplication facilities.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles of the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.

6

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Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 2. Description of Business and Summary of Significant Account Policies (contd)

Revenue Recognition

The
Company recognizes revenue from its subscription services as earned. Subscriptions
are generally billed on an annual basis, deferred at the time of billing and
amortized into revenue on a monthly basis over the term of the subscription,
generally one year. Engineering products are non-subscription based and revenue
is recognized upon shipment or, in the case of online sales, upon receipt of
payment. Revenues from other non-subscription services, such as website design,
video production, consulting services, and custom projects, are recognized on
the proportional performance method where sufficient information relating to
project status and other supporting documentation is available. The contracts
may have different billing arrangements resulting in either unbilled or deferred
revenue. The Company obtains either signed agreements or purchase orders from
its non-subscription customers outlining the terms and conditions of the products
or services to be provided. Otherwise, revenues are recognized after completion
and/or delivery of services to the customer. Duplication and related services
are generally recognized upon shipment or, if later, when the Companys
obligations are complete and realization of receivable amounts is assured. Revenue
from live training programs is recognized upon completion of the conference or
seminar, which usually lasts one or two days.

Capitalized Course Costs

Capitalized course costs include the direct cost of internally developing proprietary educational products and materials that have extended useful lives. Amortization of these capitalized
course costs commences when the courses are available for sale from the Companys catalog. The amortization period is five years. Other course costs incurred in connection with any of the Companys monthly subscription products or custom
work is charged to expense as incurred. As a result of recent acquisitions, the Company acquired $800,000 of course costs that are being amortized over a five-year period. Included in other intangible assets at March 31, 2009, are capitalized
course costs of $188,000, net of accumulated amortization of $52,000.

Deferred Revenue

Deferred revenue related to subscription services represents the portion of unearned subscription revenue amortized on a straight-line basis as earned. Deferred revenue related to website
design, video production or technology services represents that portion of amounts billed by the Company, or cash collected by the Company for which services have not yet been provided or earned in accordance with the Companys revenue
recognition policy. The Cognistar Legal division, the Financial Campus division and the Information Technology division recognize revenue eitherimmediately from the direct
sale of courses or on a deferred basis as earned, from the sale of prepaid courses.

Earnings Per Share

Basic earnings or loss per common share is net income or loss, as the case may be, divided by the weighted average number of outstanding shares outstanding of the Companys common stock, par value $.0001 per share
(the Common Stock) during the period. Basic earnings or loss per share exclude any dilutive effects of options, warrants and convertible securities. It also excludes shares of unvested restricted stock. Diluted earnings per common share
include the dilutive effect of shares of Common Stock issuable under stock options and warrants. Diluted earnings per share are computed using the weighted average number of Common Stock and Common Stock equivalent shares outstanding during the
period. Common Stock equivalent shares of 573,388 and 337,726 for the three months period ended March 31, 2009 and 2008 respectively.

Note 3. Stock-Based Compensation

The Companys 1999 Stock Option Plan (the Plan) permits the grant of options and restricted stock to employees, directors and consultants. The total number of shares currently reserved for grants under the
Plan is 748,670, provided that restricted stock grants may not exceed 200,000 shares. As of March 31, 2009, there were 418,479 options outstanding, of which 301,220 are currently exercisable, and restricted stock grants totaled 183,388, of which
47,378 shares had vested as of March 31, 2009. All stock

7

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Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 3. Stock-Based Compensation (contd)

options and restricted stock awards granted under the Plan are granted at the fair market value of the Common Stock at the grant date. Employee stock options generally vest ratably over a four-year period and generally
expire 10 years from the grant date. Stock options granted to non-employee directors vest in the same manner. Restricted stock awards generally vest in three installments; one-third immediately upon grant and one-third on the first and second
anniversary of the grant. Unvested shares are subject to forfeiture unless certain time and/or performance requirements are satisfied.

SFAS No. 123R authorizes the use of a valuation model to calculate the fair value of stock-based awards. The Company has elected to use the BSM option-pricing model, which incorporates various
assumptions including volatility, expected life, interest rates and dividend yields. The expected volatility is based on the historic volatility of the Companys Common Stock over the most recent period commensurate with the estimated expected
life of the Companys stock options, adjusted for the impact of unusual fluctuations not reasonably expected to recur. The expected life of an award is based on historical experience and on the terms and conditions of the stock awards granted
to employees and directors. The company has recorded an incremental stock-based compensation expense of $29,651 and $54,960 for the three-month periods ended March 31, 2009 and 2008, respectively.

The assumptions used for the three-month periods ended March 31, 2009 and 2008, and the resulting estimates of weighted-average fair value of options granted during those periods are as
follows:

|                                                         |  | Three months ended March 31,
|-------------------------------------------------------- |  | ----------------------------
|                                                         |  | 2009                        
|Expected life (years)                                    |  |                             
|Risk-free interest rate                                  |  |                             
|Volatility                                               |  |                             
|Dividend yields                                          |  |                             
|Weighted-average fair value of options during the period |  | $                           

The Company granted 55,750 options under the Plan during the three months ended March 31, 2009 at exercise price of $2.54 per share.

The following table represents our stock options granted, exercised and forfeited for the three months ended March 31, 2009:

|                               |  |           |   |                    | Weighted Average |                  | Weighted Average
|------------------------------ |  | --------- | - | ------------------ | ---------------- | ---------------- | ----------------
|                               |  | Number    |   | Exercise Price per |                  | Remaining       
|Stock Options                  |  | of Shares |   | Share              |                  | Contractual Term
|                              
|Outstanding at January 1, 2009 |  | 365,144   |   |                    | $4.71            |                  | 5.7             
|Granted                        |  | 55,750    |   |                    | $2.54            |                  | 10.0            
|Exercised                      |  | -         |   |                    | -                |                  | -               
|Forfeited/expired              |  | (2,415    | ) |                    | $4.88            |                  | -               
|Outstanding at March 31, 2009  |  | 418,479   |   |                    | $4.42            |                  | 5.9             
|Exercisable at March 31, 2009  |  | 301,220   |   |                    | $4.54            |                  | 6.1             





8

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Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 4. Income Tax Benefit

The Company recognizes a deferred income tax asset available from its net operating loss carryforwards, which expire in 2023. This benefit is offset by any corporate alternative minimum income
tax. The Company is currently utilizing its available net operating loss carryforwards to offset current taxable income and as such has recognized a net income tax expense of $14,000 ($2,000 current provision and $12,000 deferred
provision) for the three months ended March 31, 2009. The Company has approximately $1,092,000 of remaining deferred income tax assets as of March 31, 2009 primarily on account of net operating loss carryforwards. The Company does not believe
that it takes any uncertain income tax positions that would require disclosure under Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes.

*           *           *

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included
elsewhere in this report. Certain statements in this discussion and elsewhere in this report constitute forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934. See Forward-Looking
Statements following the Table of Contents of this 10-Q. Because this discussion involves risk and uncertainties, our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

We provide learning solutions for accounting/finance, legal, insurance, banking, brokerage and engineering professionals  six large vertical markets with mandatory continuing education
requirements. In addition, we provide training solutions for the pharmaceutical, banking, securities, insurance and technology industries. We also provide information technology, corporate governance, ethics and compliance training for the general
corporate market. We offer off-the-shelf courses and custom-designed programs with delivery methods suited to the specific needs of our clients. Our customers include professional firms of all sizes, and a large number of midsize and small
companies.

We measure our operations using both financial and other metrics. The financial metrics include revenues, gross margins, operating expenses and income from continuing operations. Other key
metrics include (i) revenues by sales source, (ii) online sales, (iii) cash flows and (iv) EBITDA.

Some of the most significant trends affecting our business are the following:

- The increasing recognition by professionals and corporations that they must continually improve their skills and those of their employees in order to remain
competitive;
- Continuing professional education requirements by governing bodies, including states and professional associations;
- The plethora of new laws and regulations affecting the conduct of business and the relationship between employers and their employees;
- The increased competition in todays economy for skilled employees and the recognition that effective training can be used to recruit and train employees;
and
- The development and acceptance of the Internet as a delivery channel for the types of products and services we offer.

Over the last four years, our annual revenues have grown from $10.2 million to $18.3 million and our annual net operating income has grown from $739,000 to $1.3 million. This growth is due in large part to
seven acquisitions that we have completed in this period. Our most recent acquisition was Loscalzo in July 2008. Loscalzo is a leading provider of live training to accountants. These courses are delivered through

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various state CPA societies, accounting firms, corporations or through seminars and conferences that they conduct. This acquisition expands our product line and customer base and gives us the opportunity to cross-market and
cross-sell our full line of products to the Loscalzo customer base. Historically, Loscalzos revenues are lowest in the first quarter of the year and grow throughout the year. Operating expenses, on the other hand, are relatively consistent
from quarter-to-quarter and cost of revenues fluctuates directly in relation to revenues. As a result, Loscalzo historically shows a significant operating loss in the first quarter of the year and increasing profitability in the subsequent quarters.
We expect this trend to continue and we further expect that it will have an impact on our quarterly operating results.

We intend to continue focusing on acquisitions that will allow us to increase the breadth and depth of our current product offerings, including the general corporate market for compliance,
governance and ethics. We will also consider acquisitions that will give us access to new markets and products. We prefer acquisitions that are accretive, as opposed to those that are dilutive, but ultimately the decision will be based on maximizing
shareholder value rather than short-term profits. The size of the acquisitions will be determined, in part, by our size, the capital available to us and the liquidity and price of our stock. We may use debt to enhance or augment our ability to
consummate larger transactions.

There are many risks involved with acquisitions, some of which are discussed in Item 1 of Part 1 under the caption Certain Risk Factors That May Affect Our Growth and Profitability
of our annual report on Form 10-K for the fiscal year ended December 31, 2008. These risks include integrating the acquired business into our existing operations and corporate structure, retaining key employees and minimizing disruptions to our
existing business. We cannot assure that we will be able to identify appropriate acquisition opportunities or negotiate reasonable terms or that any acquired business or assets will deliver the shareholder value that we anticipated at the outset.

Our common stock and warrants are traded on the NASDAQ Capital Market under the symbols SPRO and SPROW, respectively.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements that have been prepared according to accounting principles
generally accepted in the United States. In preparing these financial statements, we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent
assets and liabilities. We evaluate these estimates on an ongoing basis. We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We consider the following accounting policies to be the most important to the
portrayal of our financial condition.

Revenue

A large portion of our revenue is in the form of subscription fees for any of our monthly accounting update programs or access to our library of accounting, financial services training and
legal courses. Other sources of revenue include direct sales of programs or courses on a non-subscription basis or from various forms of live training, fees for Web site design, software development, tape and DVD duplication, video production, video
conversion, course design and development, ongoing maintenance of the PEC, and licensing fees. Subscriptions are billed on an annual basis, payable in advance and deferred at the time of billing. Sales made over the Internet are by credit card only.
Renewals are usually sent out 60 days before the subscription period ends. Larger transactions are usually dealt with by contract, the financial terms of which depend on the services being provided. Contracts for development and production services
typically provide for a significant upfront payment and a series of payments based on deliverables specifically identified in the contract.

Revenue from subscription services are recognized as earned; deferred at the time of billing or payment and amortized into revenue on a monthly basis over the term of the subscription.
Engineering products are non-subscription based and revenue is recognized upon shipment of the product or, in the case of online sales, payment. Revenue from live training is recognized when earned, usually upon the completion of a one-day seminar
or conference. Revenue from non-subscription services provided to customers, such as Web site design, video production, consulting services and custom projects is generally

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recognized on a proportional performance basis where sufficient information relating to project status and other supporting documentation is available. The contracts may have different billing arrangements resulting in
either unbilled or deferred revenue. We obtain either a signed agreement or purchase order from our non-subscription customers outlining the terms and conditions of the sale or service to be provided. Otherwise, these services are recognized as
revenue after completion and delivery to the customer. Duplication and related services are generally recognized upon shipment or, if later, when our obligations are complete and realization of receivable amounts is assured.

Revenue from live training is recognized when the seminar or conference is completed. These are usually one or two day events.

Impairment of long-lived assets

We review long-lived assets and certain intangible assets annually for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not
be recovered.

Stock-based compensation

We have adopted the recognition and measurement requirements of Statement of Financial Accounting Standards No. 123R. As a result, compensation costs are now recognized in the financial
statements for stock options or grants awarded to employees and directors. Options and warrants granted to non-employees are recorded as an expense at the date of grant based on the then estimated fair value of the stock-based instrument granted.

Segment accounting

All of our operations constitute a single segment, that of educational services. Revenues from non-educational services, such as video production are not a material part of our operating
income.

Results of Operations

Comparison of three months ended March 31, 2009 and 2008

Despite the fact that Loscalzo generated minimal net revenues in the quarter and accounted for significant expenses, our operating results for the quarter ended March 31, 2009 were
significantly improved compared to the quarter ended March 31, 2008:

- net revenues increased 12.3%;
- gross profit increased 20.6% and gross profit margin increased 7.4%; and
- net income was approximately $30,000 compared to a $121,000 net loss in the earlier period.

On the other hand, selling, general and administrative expenses increased 4.5%.

Online revenues, which previously were primarily derived from the sales of accounting/finance products, continue to be an important factor contributing to our overall revenue growth. However,
many of our other products, including our Cognistar law library, our Financial Campus and banking courses and our technology training products are also delivered online and also contribute to our revenue growth.

The following table compares our statement of operations data for the three months ended March 31, 2009 and 2008. The trends suggested by this table may not be indicative of future operating
results, which will depend on various factors including the relative mix of products sold (accounting/finance, law, engineering, financial services, sales training  product, technology or compliance and ethics) and the method of sale (video or
online) as well as the timing of custom project work, which can vary from quarter to quarter. In addition, our operating results in future periods may also be affected by acquisitions.

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|                                       |  | Three months ended March 31,
|-------------------------------------- |  | ----------------------------
|                                       |  | 2009                        
|                                       |  | Amount                      
|                                      
|Net revenues                           |  | $                           
|Cost of revenues                       |  |                             
|Gross profit                           |  |                             
|Selling, general and administrative    |  |                             
|Depreciation and amortization          |  |                             
|Total operating expenses               |  |                             
|Operating income (loss)                |  |                             
|Other income, net                      |  |                             
|Net income (loss) before provision for |  |                             
|income tax                             |  |                             
|Provision for income tax               |  |                             
|Net (loss) income                      |  | $                           

Net revenues

Net revenues for the three months ended March 31, 2009, increased approximately $478,000, or 12.3%, compared to net revenues for the three months ended March 31, 2008. This increase was
primarily due to: (i) the Accounting/Finance division whose net revenues increased $35,000; (ii) the Financial Services Training division whose net revenues increased $122,000; (iii) Skye whose net revenues increased $424,000; and (iv)
the Consulting division, whose revenues increased $71,000. These increases were offset by: (i) a $15,000 decrease in net revenues from the Video Production and Duplication division; (ii) a $14,000 decrease in net revenues from the Ethics
and Compliance division; (iii) a $45,000 decrease in net revenues from the Cognistar Legal division; (iv) a $99,000 decrease in net revenues from the Engineering division; and (v) a $1,000 decrease in net revenues from the Technology
Training division. Under our long-standing policy, revenue is credited to the originating department regardless of the type of service that is performed. For example, a contract to convert videotapes to digital format is credited to the
Accounting/Finance division if that is where the sale originated, even if the project has nothing to do with accounting.

In the first quarter of 2009, net revenues from the Accounting/Finance division were $2.19 million, or 50% of net revenues, compared to $2.15 million, or 55% of net revenues, in the
comparable 2008 period. The 2009 period included $104,000 of net revenues generated by Loscalzo. Net revenues from subscription-based products and direct sales of course material on a non-subscription basis, decreased from $1.96 million in
the 2008 period to $1.92 million in the corresponding 2009 period. Net revenues derived from other projects in our Accounting/Finance division that are not subscription based decreased from $196,000 in 2008 to $163,000 in 2009.
Non-subscription-based revenues fluctuate from period to period and are not indicative of any trends. In the 2009 period, net revenues from online sales of accounting products accounted for approximately $911,000, or 21% of net revenues,
compared to $815,000, or 21% of net revenues, in the comparable 2008 period. This represents a 12% increase in absolute dollars. However, total online sales were $1.6 million in the 2009 period, or 37% of net revenues, as compared to
$1.3 million in the comparable 2008 period, an increase of 12%.

For the three months ended March 31, 2009, Skye generated net revenues of $1.04 million compared to $619,000 in the first quarter of 2008. Skyes income is derived primarily from
consulting projects that vary from quarter to quarter. Therefore, quarterly results will vary and revenues are not necessarily indicative of long-term trends.

Our Financial Services Training division generated $523,000 of net revenues in the quarter ended March 31, 2009. For the quarter ended March 31, 2008, this division generated $401,000
of net revenues.

Our Technology Training division generated $29,000 of net revenues in the 2009 period, as compared to $30,000 in the first quarter of 2008.

For the quarter ended March 31, 2009, SLE had net revenues of $272,000 compared to net revenues of $331,000 for the quarter ended March 31, 2008. For the 2009 period, $161,000 of
SLEs net revenues was generated by the Ethics and Compliance division and $111,000 was generated by the Cognistar Legal division. Net revenues generated by the Ethics and Compliance division are derived primarily from custom consulting
work. Custom work is non-repetitive and subject to market conditions and can vary from quarter to quarter. The Cognistar Legal division derives its revenue primarily from prepaid usage and direct sales of its courses.

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Our Engineering division generated $201,000 of net revenues in the first quarter of 2009 compared to $300,000 in the first quarter of 2008. This decrease is not necessarily indicative
of any trends, but is a result of timing differences in the placement of orders from customers. Sales of our engineering products are not subscription based.

Net revenues generated by the Video Production and Duplication division were $25,000 and from the Consulting division were $75,000 for the first quarter of 2009 compared to $40,000
and $4,000 respectively for the first quarter of 2008. We believe the decline in video production and duplication net revenues reflects an overall trend in the business.

Cost of revenues

Cost of revenues includes: (i) production costs i.e., the salaries, benefits and other costs related to
personnel, whether our employees or independent contractors, who are used directly in production, including producing our educational programs and/or upgrading our technology; (ii) royalties paid to third parties; (iii) the cost of materials, such
as DVDs and packaging supplies; and (iv) shipping and other costs. There are many different types of expenses that are characterized as production costs and many of them vary from period to period depending on many factors. Generally,
subscription based products have higher profit margins than non-subscription based products and online sales have higher profit margins than sales involving physically delivery of DVDs, disks and written materials.

Our gross profit margin increased for the three months ended March 31, 2009 to 54.0% compared to 50.3% for the three months ended March 31, 2008. This increase is attributable, in part, to
increased revenue from custom work without any significant increases in payroll, the benefits of outsourcing certain projects and the product mix. We also devoted a significant amount of internal resources to develop new products and to re-tooling
existing products and technology.

Cost of revenues increased by $80,000 in the current quarter from the comparable period last year. The increase is attributable to a number of factors: (i) salaries and related costs
decreased by approximately $39,000; (ii) outside labor and productions costs related to custom projects increased approximately $109,000; and (iii) other costs increased by approximately $10,000. Beginning in 2008, we started to reduce
our labor costs by outsourcing a substantial amount of technology projects to countries where labor costs are lower than they are in the United States. Our outsourcing strategy has been driven, in part, by increased business generated from Skye and
internal projects. We have determined that it is more efficient to outsource certain projects rather than hire additional personnel.

- Outside labor and direct production costs. Outside labor includes the cost of hiring actors and production personnel such as
directors, producers and cameramen and the outsourcing of non- video technology. It also includes the costs of instructors for live training and the production of those courses. The
cost of such outside labor, which is primarily video production and technology personnel and instructors, increased $109,000 after capitalizing a portion of these costs. This
increase is directly related to the completion of a number of custom projects. Direct production costs, which are costs related to producing videos, courses, custom projects or live instruction other than labor costs, such as the cost of renting equipment and locations and the use of outsourced labor in the technology area, increased $76,000. The variation in direct
production costs are related to the type of production and other projects and do not reflect any trends in our business. As our business grows we may be required to hire additional
production personnel, increasing our cost of revenues.
- Royalties. Royalty expense decreased in the three months ended March 31, 2009, compared to the comparable 2008 period by $14,000.
This is a result of timing differences in payments to our partners in our engineering courses and to our organizational partners in the accounting education area for which we often
have to make estimates.
- Salaries. Overall, payroll and related costs attributable to production personnel decreased by $39,000 after capitalizing a
portion of these costs during the current quarter. We have reduced salaries and related costs in our consulting and video production departments as a result of decreased business in
our duplication business and outsourcing of technology services. This decrease was offset by increased salaries and related costs as a result of normal salary increases and additional
personnel as a result of our acquisition of Loscalzo.

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- Other production related costs. These are other costs directly related to the production of our products such as purchases of
materials, travel, shipping and other. These costs decreased by $52,000 from 2008 to 2009. This is primarily a direct result of travel-related expenses incurred by SLE and Skye,
most of which is reimbursed by the customer on whose behalf those expenses were incurred and a reduction in our shipping costs as a result of switching to DVD from videotape for our
subscription based products.

Selling, general and administrative expenses

Selling, general and administrative expenses include corporate overhead, such as compensation and benefits for administrative, sales and marketing and finance personnel, rent, insurance,
professional fees, travel and entertainment and office expenses. Selling, general and administrative expenses for the three months ended March 31, 2009 increased $89,000, or 4.5%, compared to the three months ended March 31, 2008. The increase
in selling, general and administrative expenses is primarily attributable to the Loscalzo acquisition.

Compensation expense in the 2009 period decreased $39,000 over compensation expense for the 2008 period. Our total number of full time general and administrative employees at March 31, 2009
was 58 compared to 49 at March 31, 2008. Compensation expense includes stock based compensation expense of $30,000 for the 2009 period and $55,000 for the 2008 period.

In February 2009 we granted 55,750 options to various employees. The closing price of the stock on the dates of issuance was $2.54. Using the BSM model we determined that these options had
a cost of $59,000 that is being amortized over a three-year period. The value of the options was determined by using a volatility factor of 45%, a risk-free interest rate of 1.99% and expected life of 5.1 years.

Our other selling, general and administrative costs, exclusive of compensation costs, increased $128,000. These costs include rent, insurance and other expenses. We continue to look for
other opportunities to reduce our overhead. Although, we make every effort to control our costs, we anticipate that selling, general and administrative expenses will continue to increase as a result of general increases in costs such as rent,
insurance and travel.

Depreciationandamortization

Depreciation and amortization expenses increased by $44,000 in the first quarter of 2009 compared to the first quarter of 2008 as a result of increased amortization expense from our
capitalized course costs, intangibles acquired through acquisitions and from the depreciation of fixed assets acquired from our various acquisitions and/or purchased in 2007 and 2008. We expect our depreciation and amortization expense on our fixed
and intangibleassets to continue to increase as we replace computer equipment, capitalize internal costs for the development of new courses and other technology and begin to
amortize intangibles acquired through acquisitions. Although many of our older assets are either fully or almost fully depreciated and we do not anticipate replacing them at the same rate, this is partially offset by the amortization of the
intangibles acquired through acquisitions.

Operating income (loss)

For the three months ended March 31, 2009,net income from operations was $28,000 compared to an operating loss of
$241,000 in the comparable period of 2008.

Other income, net

Other income and expense items consist of interest earned on deposits and the net loss from our iReflect joint venture. We have used all the proceeds from our public offering. We have no debt
other than trade payables and accrued liabilities. However, interest rates are substantially lower than they were in 2008. As a result, for the first quarter of 2009 we had net interest income of $17,000 compared to net interest income of
$120,000 in the first quarter of 2008. The loss from our iReflect joint venture for the quarter ended March 31, 2009 was $1,000. We anticipate comparable interest income in future periods.

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Income Tax Provision

We
account for deferred tax assets available principally from our net operating
loss carryforward pursuant to SFAS No. 109. To date we have recognized a total
of approximately
$1,092,000 in such assets, after applying a deferred tax expense of $12,000
for the period ended March 31, 2009.

Net income (loss)

For the three months ended March 31, 2009,we recorded a net income of $ 30,000, or $0.01 per share, basic and
diluted, compared to a net loss of $121,000 or $0.02 per share, basic and diluted, for the three months ended March 31, 2008.

Liquidity and Capital Resources

Since becoming a public reporting company in October 2004, we have financed our working capital requirements through internally generated funds. In addition, our initial public offering yielded
net proceeds of approximately $6.0 million. To date we have used all of the net proceeds of the public offering; $5.5 million to make acquisitions and $500,000 to repay debt. At March 31, 2009, we had no indebtedness for borrowed money.

Our working capital as of March 31, 2009 was approximately $2.5 million compared to $2.3 million at December 31, 2008. Our current ratio at March 31, 2009 was 1.36 to 1 compared to 1.31 to 1 at December 31, 2008.
The current ratio is derived by dividing current assets by current liabilities and is a measure used by lending sources to assess our ability to repay short-term liabilities. The largest component of our current liabilities is deferred revenue,
which was $5.3 million at March 31, 2009 compared to $5.6 million at December 31, 2008. This decrease is attributable to subscription-based products and custom projects that were billed in 2008 and earned in the first quarter of 2009.

At March 31, 2009, we had cash and cash equivalents of $6.9 million. For the three months ended March 31, 2009, we reported a net increase in cash of $ 316,000, which includes $475,000 of cash provided by
operating activities offset by $159,000 of cash used by investing activities. The primary components of our operating cash flows are net income adjusted for non-cash expenses, such as depreciation and amortization stock-based compensation and
deferred compensation, and the changes in our operating assets and liabilities, such as accounts receivable, accounts payable and deferred revenues.

For the 2009 period, net cash used in investing activities was $158,000, which included capital expenditures of $44,000, consisting primarily of computer equipment and software purchases, $92,000 for software
development costs relating to new products and $41,000 for course development. This was offset by a $19,000 decrease in goodwill relating to a closing adjustment in connection with the Loscalzo acquisition and an adjustment to the estimated
contingent purchase price for Skye. We continually upgrade our technology hardware and while we do not anticipate any unusual capital expenditures relating to equipment purchases over the next 12 months, we cannot be assured that such expenditures
will not be required.

For the 2009 period, no cash was used for financing activities.

In April 2009 we paid approximately $700,000 in cash to the former shareholders of Skye and agreed to issue to them 83,825 shares of our common stock in satisfaction of the
earn-out contingent purchase price for the Skye assets. This liability was accrued at December 31, 2008.

We believe that our current cash balances together with cash flow from operations will be sufficient to meet our working capital and capital expenditure requirements for the next 12 months.

In the future, we may issue additional debt or equity securities to satisfy our cash needs. Any debt incurred may be secured or unsecured, bear interest at a fixed or variable rate and may
contain other terms and conditions that we deem are reasonable under the circumstances existing at the time. Any sales of equity securities may be at or below current market prices. We cannot assure you that we will be successful in generating
sufficient capital to adequately fund our liquidity needs.

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Item 3. Quantitative and Qualitative Risk Disclosures About Market Risk

As a smaller reporting company we are not required to provide the information required by this Item.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.Management, with the participation of our principal executive officer and principal financial officer,
carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (the Exchange Act) Rules 13a-15(e) and 15-d-15(e)) as of the end of the
period covered by this quarterly report (the Evaluation Date). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures
are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and
forms and (ii) is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting.There were no changes in our internal controls over financial reporting that occurred during the
period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART IIOTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material legal proceeding not in the ordinary course of business at this time.

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

Recent Sales of Unregistered Securities

In April 2009 we paid approximately $700,000 in cash to the former shareholders of Skye and agreed to issue to them 83,825 shares of our common stock in satisfaction of the
earn-out contingent purchase price for the Skye assets. The issuance of these shares is exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the Act). The stock certificates
representing these shares were imprinted with a legend restricting transfer unless pursuant to an effective registration statement or an exemption from registration under the Act.

Company Purchases of its Equity Securities

On November 11, 2008, the Board of Directors approved an extension of the stock buy back program and replenished the funds reserved to purchase shares of our common stock on the NASDAQ Capital Market to $750,000. From
November 11, 2008 through December 31, 2008, we repurchased an additional 85,424 shares of our common stock for $252,308 under this program. During the three months ended March 31, 2009, no additional shares were repurchased, and as of such date
approximately $497,692 was available under this program.

Item 3. Defaults Upon Senior Securities

None.

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

None.

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Item 5. Other Information

None.

Item 6.Exhibits

Exhibits:

|Exhibit No. | Description
|----------- | -----------
|            |            
|            | 31.1       
|           
|            | 31.2       
|           
|            | 32.1       

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|      |  |             |  | SmartPros Ltd.               
|----- |  | ----------- |  | -----------------------------
|      |  |             |  | (Registrant)                 
|     
|Date: |  | May 5, 2009 |  | /s/ Allen S. Greene          
|      |  |             |  | Chief Executive Officer      
|     
|Date: |  | May 5, 2009 |  | /s/ Stanley P. Wirtheim      
|      |  |             |  | Chief Financial Officer      
|      |  |             |  | (Principal Financial Officer)















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