No, it's more counterintuitive than that. The cat can only be in one state at a time, yes. But the states |ALIVE> and |DEAD> are *not* the only possible states the cat can be in, according to quantum theory. It can also be in a more general state that, mathematically, we would write as
|C> = a|ALIVE> + b|DEAD>
where a and b are complex numbers whose squared moduli add up to 1. (In general, a and b are time dependent; in the setup as Schrodinger originally gave it, a^2 decreases as time goes on, while b^2 increases). The point is that this general state |C> is a state which is a perfectly valid quantum state, according to the theory, but in which the cat is neither alive nor dead, nor is it correct to say that the cat "could" be alive or "could" be dead in this state. This state |C> that the cat is in during the experiment is simply a state that has no classical analogue, and no classical description like "cat alive" or "cat dead" or even "cat could be alive or could be dead".
We observe small objects like electrons in states like this all the time; but Schrodinger's point with the cat thought experiment was to raise the question of whether things like cats can really be in such states. (IIRC he thought they couldn't, and intended his thought experiment as a reductio ad absurdum of the claim that quantum mechanics was a complete theory.)