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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE 13G
Under
the Securities Exchange Act of 1934
(Amendment
No. )*
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Charles
& Colvard LTD.
(Name
of Issuer)
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Common
Stock
(Title
of Class of Securities)
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159765106
(CUSIP
Number)
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Calendar
Year 2006
(Date
of Event which Requires Filing of this
Statement)
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Check
the appropriate box to designate the rule pursuant to which this
Schedule
is filed:
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[
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X
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] Rule
13d-1(b)
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[
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X
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] Rule
13d-1(c)
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[
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] Rule
13d-1(d)
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*
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.
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The
information required on 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).
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SCHEDULE
13G
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CUSIP
No. 159765106
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1.
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Names
of Reporting Persons.
Chester
L.F. Paulson and Jacqueline M. Paulson, as joint tenants
I.R.S.
Identification Nos. of above persons (entities only).
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2.
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Check
the Appropriate Box if a Member of a Group (See Instructions)
(a) [
] (b) [ X
]
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3.
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SEC
USE ONLY
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4.
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Citizenship
or Place of Organization
United
States of America
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Number
of
Shares
Beneficially
Owned
by
Each
Reporting
Person
With:
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5.
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Sole
Voting Power
32,500
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6.
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Shared
Voting Power
1,130,500
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7.
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Sole
Dispositive Power
32,500
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8.
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Shared
Dispositive Power
1,130,500
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9.
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Aggregate
Amount Beneficially Owned by Each Reporting Person
1,163,000
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10.
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Check
if the Aggregate Amount in Row (9) Excludes Certain Shares (See
Instructions) [ ]
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11.
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Percent
of Class Represented by Amount in Row (9)
6.4586
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12.
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Type
of Reporting Person
IN
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Chester
L.F. and Jacqueline M. Paulson (together the "Paulsons") may be deemed
to
control Paulson Capital Corp. ("PLCC"), which wholly owns Paulson
Investment Company, Inc. ("PICI"). The Paulsons control and are the
sole
and equal members of the Paulson Family, LLC. ("LLC") which is a
controlling shareholder of PLCC, which is the parent company for
PICI.
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SCHEDULE
13G
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CUSIP
No. 159765106
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1.
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Names
of Reporting Persons.
Paulson
Capital Corp.
I.R.S.
Identification Nos. of above persons (entities only).
93-0589534
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2.
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Check
the Appropriate Box if a Member of a Group (See Instructions)
(a) [
] (b) [ X
]
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3.
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SEC
USE ONLY
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4.
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Citizenship
or Place of Organization
United
States of America
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Number
of
Shares
Beneficially
Owned
by
Each
Reporting
Person
With:
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5.
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Sole
Voting Power
0
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6.
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Shared
Voting Power
913,000
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7.
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Sole
Dispositive Power
0
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8.
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Shared
Dispositive Power
913,000
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9.
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Aggregate
Amount Beneficially Owned by Each Reporting Person
913,000
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10.
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Check
if the Aggregate Amount in Row (9) Excludes Certain Shares (See
Instructions) [ ]
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11.
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Percent
of Class Represented by Amount in Row (9)
5.0703
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12.
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Type
of Reporting Person
BD
and CO
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Paulson
Capital Corp. ("PLCC") wholly owns Paulson Investment Company, Inc.
("PICI"). PLCC is a corporation and PICI is a
broker-dealer.
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Item
1.
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(a)
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Name
of Issuer
Charles
& Colvard, LTD.
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(b)
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Address
of Issuer's Principal Executive Offices
300
Perimeter Park Drive, Suite A
Morrisville,
NC 27560
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Item
2.
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(a)
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Name
of Person Filing
This
statement is being filed jointly by each of the following persons
pursuant
to Rule 13d-1(k) promulgated by the Securities and Exchange Commission
under Section 13 of the Securities Exchange Act of 1934, as amended:
(i)
Chester L.F. Paulson and Jacqueline M. Paulson, as joint tenants
and each
individually (together, the "Paulsons") who are each 50% members
of the
Paulson Family, LLC. ("LLC"); and (ii) Paulson Capital Corporation,
an
Oregon corporation ("PLCC"), which directly wholly owns Paulson Investment
Company, Inc., an Oregon corporation ("PICI"). The Paulsons and PLCC
are
collectively referred to as the "Reporting Persons". The Reporting
Persons
schedule 13G Joint Filing Agreement is attached as Exhibit 1.
Information
with respect to the Reporting Persons is given solely by such Reporting
Persons, and no Reporting Person assumes responsibility for the accuracy
or completeness of the information by another Reporting Person, except
as
otherwise provided in Rule 13d-1(k). By their signature on this statement,
each of the Reporting Persons agree that this statement is filed
on behalf
of such Reporting Persons.
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(b)
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Address
of Principal Business Office or, if none, Residence
The
Paulsons, PLCC's, and PICI's principal business address is:
811
S.W. Naito Parkway, Suite 200
Portland,
Oregon 97204
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(c)
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Citizenship
The
Paulsons are citizens of the United States of America, and PLCC and
PICI
are organized under the laws of the United States of
America.
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(d)
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Title
of Class of Securities
Common
Stock for Charles & Colvard, LTD.
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(e)
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CUSIP
Number
159765106
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Item
3.
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If
this statement is filed pursuant to §§240.13d-1(b) or 240.13d-2(b) or (c),
check whether the person filing is a:
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(a)
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[
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Broker
or dealer registered under section 15 of the Act (15 U.S.C.
78o).
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(b)
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[
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Bank
as defined in section 3(a)(6) of the Act (15 U.S.C.
78c).
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(c)
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[
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Insurance
company as defined in section 3(a)(19) of the Act (15 U.S.C.
78c).
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(d)
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[
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Investment
company registered under section 8 of the Investment Company Act
of 1940
(15 U.S.C 80a-8).
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(e)
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An
investment adviser in accordance with
§240.13d-1(b)(1)(ii)(E);
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(f)
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[
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An
employee benefit plan or endowment fund in accordance with
§240.13d-1(b)(1)(ii)(F);
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(g)
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[
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A
parent holding company or control person in accordance with §
240.13d-1(b)(1)(ii)(G);
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(h)
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[
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A
savings associations as defined in Section 3(b) of the Federal Deposit
Insurance Act (12 U.S.C. 1813);
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(i)
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[
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A
church plan that is excluded from the definition of an investment
company
under section 3(c)(14) of the Investment Company Act of 1940 (15
U.S.C.
80a-3);
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(j)
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[
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Group,
in accordance with §240.13d-1(b)(1)(ii)(J).
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Item
4.
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Ownership.
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(a)
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Amount
beneficially owned:
The
Paulsons may be deemed to be the beneficial owners of a total of
1,163,000
shares of Issuer Common Stock. The precise owners of these shares
is
described more specifically in this paragraph. The Paulsons may be
deemed
to control Paulson Capital Corp. ("PLCC"), which wholly owns Paulson
Investment Company, Inc. ("PICI"). The Paulsons control and are the
sole
and equal members of the Paulson Family, LLC. ("LLC"). Through the
LLC,
the Paulsons indirectly own 217,500 shares of Issuer Common Stock.
The
Paulsons collectively directly own 32,500 shares of Issuer Common
Stock.
Chester Paulson directly owns 0 shares of Issuer Common Stock. Jacqueline
Paulson directly owns 0 shares of Issuer Common Stock. The Paulsons
may be
deemed to indirectly own 913,000 shares of Issuer Common Stock through
PICI. Pursuant to SEC Rule 13d-4, the Paulsons expressly disclaim
beneficial ownership of the 913,000 shares of Issuer Common Stock
of which
PICI is the record owner.
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(b)
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Percent
of class:
As
of October 31, 2006, the Issuer had 18,006,966 shares of Issuer Common
Stock issued and outstanding, as reported in the Issuer's Form 10-Q
filed
with the SEC on November 8, 2006 (the "Issuer Outstanding Shares").
The
Paulsons actual and deemed beneficial ownership of Issuer Common
Stock
represented approximately 6.4586% of the Issuer Outstanding Shares.
PLCC's
indirect beneficial ownership of Issuer Common Stock represented
approximately 5.0703% of the Issuer Outstanding Shares.
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(c)
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Number
of shares as to which the person has:
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(i)
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Sole
power to vote or to direct the vote
The
Paulsons have sole power to vote or direct the vote of 32,500 shares.
PLCC
has sole power to vote or direct the vote of 0 shares.
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(ii)
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Shared
power to vote or to direct the vote
The
Paulson have shared power to vote or direct the vote of 1,130,500
shares.
PLCC has the shared power to vote or direct the vote of 913,000
shares.
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(iii)
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Sole
power to dispose or to direct the disposition of
The
Paulsons have sole power to dispose or direct the disposition of
32,500
shares. PLCC has sole power to dispose or direct the disposition
of 0
shares.
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(iv)
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Shared
power to dispose or to direct the disposition of
The
Paulsons have shared power to dispose or direct the disposition of
1,130,500 shares. PLCC has shared power to dispose or direct the
disposition of 913,000 shares.
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Item
5.
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Ownership
of Five Percent or Less of a Class
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If
this statement is being filed to report the fact that as of the date
hereof the reporting person has ceased to be the beneficial owner
of more
than five percent of the class of securities, check the following [
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Instruction:
Dissolution of a group requires a response to this item.
Not
Applicable
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Item
6.
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Ownership
of More than Five Percent on Behalf of Another
Person
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Not
Applicable
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Item
7.
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Identification
and Classification of the Subsidiary Which Acquired the Security
Being
Reported on By the Parent Holding Company or Control
Person
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See
Item 4(a)
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Item
8.
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Identification
and Classification of Members of the Group
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Not
Applicable
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Item
9.
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Notice
of Dissolution of Group
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Not Applicable |
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Item
10.
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Certifications
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By
signing below I certify that, to the best of my knowledge and belief,
the
securities referred to above were acquired and are held in the ordinary
course of business and were not acquired and are not held for the
purpose
of or with the effect of changing or influencing the control of the
issuer
of the securities and were not acquired and are not held in connection
with or as a participant in any transaction having that purpose or
effect.
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SIGNATURE
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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.
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Date:
February 6, 2007
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Chester
L.F. Paulson
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By:
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/s/ Chester
L.F. Paulson
Chester
L.F. Paulson
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Title:
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Individually
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Jacqueline
M. Paulson
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By:
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/s/ Jacqueline
M. Paulson
Jacqueline
M. Paulson
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Title:
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Individually
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Paulson
Capital Corp.
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By:
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/s/ Chester
L.F. Paulson
Chester
L.F. Paulson
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Title:
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Chairman
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