UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                  SCHEDULE 13G



                    Under the Securities Exchange Act of 1934

                              (Amendment No. ____)*



                             Charles & Colvard, Ltd.
--------------------------------------------------------------------------------
                                (Name of Issuer)

                               Issuer Common Stock
--------------------------------------------------------------------------------
                         (Title of Class of Securities)

                                    159765106
--------------------------------------------------------------------------------
                                 (CUSIP Number)

                                February 16, 2001
--------------------------------------------------------------------------------
             (Date of Event which Requires Filing of this Statement)

Check the  appropriate box to designate the rule pursuant to which this Schedule
is filed:

             |_|      Rule 13d-1(b)

             |X|      Rule 13d-1(c)

             |_|      Rule 13d-1(d)

*The  remainder of this cover page shall be filled out for a reporting  person's
initial filing on this form with respect to the subject class of securities, and
for any  subsequent  amendment  containing  information  which  would  alter the
disclosures provided in a prior cover page.

The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the  Securities  Exchange  Act of
1934 ("Act") or otherwise  subject to the liabilities of that section of the Act
but  shall be  subject  to all other  provisions  of the Act  (however,  see the
Notes).




Potential persons who respond to the collection of information contained in this
form are not required to respond unless the form displays a currently  valid OMB
control number.


                                  Page 1 of 6

<PAGE>
                                       13G

CUSIP No. 159765106                                          Page 2 of 6 pages
--------------------------------------------------------------------------------
1     NAME OF REPORTING PERSON
      Paulson Capital Corp.
      I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
      93-05898534
--------------------------------------------------------------------------------
2     CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
                                                                      (a) | |
                                                                      (b) | |

--------------------------------------------------------------------------------
3     SEC USE ONLY


--------------------------------------------------------------------------------
4     CITIZENSHIP OR PLACE OF ORGANIZATION

      Paulson Capital Corp. is an Oregon corporation.
--------------------------------------------------------------------------------
                       5   SOLE VOTING POWER

                           2,070,992
NUMBER OF              ---------------------------------------------------------
SHARES                 6   SHARED VOTING POWER
BENEFICIALLY OWNED BY
EACH REPORTING PERSON      --
WITH                   ---------------------------------------------------------
                       7   SOLE DISPOSITIVE POWER

                           2,070,992
                       ---------------------------------------------------------
                       8   SHARED DISPOSITIVE POWER

                           --
--------------------------------------------------------------------------------
9     AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

      2,070,992
--------------------------------------------------------------------------------
10    CHECK IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES*
                                                                          [ ] 
      
--------------------------------------------------------------------------------
11    PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (9)

      15.4%
--------------------------------------------------------------------------------
12    TYPE OF REPORTING PERSON*

      CO
--------------------------------------------------------------------------------


                               Page 2 of 6 pages


<PAGE>
Item 1.  Issuer
   (a)   The name of the Issuer is Charles & Colvard, Ltd.
   (b)   The Issuer's Principal Executive Offices are located at 3800 Gateway
         Boulevard, Suite 311, Morrisville, NC 27560

Item 2.  Reporting Person and Security
   (a)   This Statement is filed by Paulson Capital Corp. ("PCC"), an Oregon
         corporation.

   (b)   PCC's Principal Business Office is located at 811 SW Naito Parkway,
         Suite 200, Portland, OR 97204.

   (c)   PCC is organized in the United States of America.

   (d)   This Statement relates to shares of Common Stock of Charles & Colvard,
         Ltd.

   (e)   The CUSIP Number assigned to the Common Stock of the Issuer is
         159765106.


Item 3. If this statement is filed pursuant to Rule 13d-l(b), or 13d-2(b), check
whether the person filing is a: (Not applicable.)
   (a)   |_| Broker or Dealer registered under Section 15 of the Act
   (b)   |_| Bank as defined in section 3(a)(6) of the Act
   (c)   |_| Insurance Company as defined in section 3(a)(19) of the Act
   (d)   |_| Investment Company registered under section 8 of the Investment
         Company Act of 1940
   (e)   |_| Investment Adviser registered under section 203 of the Investment
         Advisers Act of 1940
   (f)   |_| Employee Benefit Plan, Pension Fund which is subject to the
         provisions of the Employee Retirement Income Security Act of 1974 or
         Endowment Fund; see ss.240.13d-l(b)(1)(ii)(F)
   (g)   |_| Parent Holding Company, in accordance with ss.240.13d-l(b)(ii)(G)
         (Note: See Item 7)
   (h)   |_| Savings Association as defined in Section 3(b) of the Federal
         Deposit Insurance Act
   (i)   |_| Church Plan that is excluded from definition of an investment
         company under Section 3(c)(14) of the Investment Company Act of 1940
   (j)   |_| Group, in accordance with ss.240.13d-l(b)(1)(ii)(J)


                               Page 3 of 6 pages

<PAGE>
Item 4.  Ownership
   (a)  Under  the  rules  and   regulations  of  the  Securities  and  Exchange
Commission, PCC may be deemed to be the beneficial owner of a total of 2,070,992
shares of Issuer Common Stock.

   (b) Of the 13,447,714 shares of the Issuer's  Common Stock  outstanding as of
February 21, 2001, PCC's beneficial ownership represented approximately 15.4%.

   (c) Paulson Investment  Company,  Inc. ("PIC") is the wholly owned subsidiary
of PCC. PIC is the record holder of the common stock and warrants over which PCC
has the  power to vote or  direct  the  vote and to  dispose  or to  direct  the
disposition of the total amount of shares that it beneficially  owns. The shares
beneficially  owned by PCC include 2,070,992 shares of common stock owned by PIC
comprised  of the  following  (for  purposes  of the  discussion  of  beneficial
ownership,  "Warrant" shall refer to a warrant  entitling the holder to purchase
one share of the issuer's common stock): a warrant to purchase 214,592 shares of
Common  Stock;  and;  1,856,400  Shares of Common  Stock  held in PIC's  trading
account.

Item 5.  Ownership of Five Percent or Less of a Class
   Not applicable.

Item 6.  Ownership of More than Five Percent on Behalf of Another Person.
   Not applicable.

Item 7. Identification and Classification of the Subsidiary Which Acquired the
Security Being Reported on By the Parent Holding Company
   PCC has filed this schedule pursuant to Rule 13d-1(c). See attached Exhibit A
identifying the relevant subsidiary.

Item 8. Identification and Classification of Members of the Group
   Not applicable.

Item 9.  Notice of Dissolution of Group
   Not applicable.

Item 10.  Certification
   By signing below I certify that, to the best of my knowledge and belief,  the
securities  referred to above were  acquired in the ordinary  course of business
and were not  acquired for the purpose of and do not have the effect of changing
or  influencing  the  control  of the  issuer  of such  securities  and were not
acquired in connection with or as a participant in any  transaction  having such
purposes or effect.

                               Page 4 of 6 pages

<PAGE>




                                    SIGNATURE
   After  reasonable  inquiry  and to the best of my  knowledge  and  belief,  I
certify that the information  set forth in this statement is true,  complete and
correct.

         Dated March 6, 2000


                                        PAULSON CAPITAL CORP.

                                        CHESTER L.F. PAULSON
                                        ----------------------------------------
                                                     Signature

                                        Chester L.F. Paulson
                                        ----------------------------------------
                                        Chairman     [Name/Title]




























                               Page 5 of 6 pages

<PAGE>
                                                                       EXHIBIT A


                                Exhibit to Item 7


         Paulson Investment Company, Inc. is the subsidiary of Paulson Capital
Corp. which acquired the security being reported on by the parent holding
company. Paulson Investment Company, Inc. is located at 811 SW Naito Parkway,
Ste. 200, Portland, OR 97204.
































                               Page 6 of 6 pages