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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON D.C. 20549

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FORM 10-QSB/A

(Amendment No. 1)

Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For
the Quarter ended March 31, 2001

Commission
file number: 0-18188

PAULSON CAPITAL CORP.Exact name of registrant as specified in its charter

Oregon(State of incorporation)

93-0589534(I.R.S. Employer Identification)811 S.W. Naito Parkway
Portland, OR(Address of principal executive offices)

97204(Zip Code)


Registrant's
telephone number, including area code:(503) 243-6000

Check
whether the issuer (1) filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes /x/ No / /

Number
of shares outstanding of each of the issuer's classes of common stock, as of May 10, 2001:

Common
stock, no par value3,263,866 shares

Transitional
Small Business Disclosure Format Yes / / No /x/

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PART IFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PAULSON CAPITAL CORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(unaudited)

|                                                                                                                         |  | 3/31/01 |            | 12/31/00
|------------------------------------------------------------------------------------------------------------------------ |  | ------- | ---------- | --------
|ASSETS                                                                                                                   |  |         |            |         
|CURRENT ASSETS                                                                                                           |  |         |            |         
|Cash and cash equivalents                                                                                                |  | $       | 127,940    |         
|Receivable from clearing organization                                                                                    |  |         | 4,175,585  |         
|Notes and other receivables                                                                                              |  |         | 813,884    |         
|Trading securities, at market value                                                                                      |  |         | 1,103,954  |         
|Investment securities, at market value                                                                                   |  |         | 13,828,651 |         
|Underwriter warrants, at estimated fair value                                                                            |  |         |           |         
|Prepaid and deferred expenses                                                                                            |  |         | 273,292    |         
|Deferred income taxes                                                                                                    |  |         | 5,298,000  |         
|                                                                                                                         |  |         |            |         
|Total current assets                                                                                                     |  |         | 25,621,306 |         
|                                                                                                                         |  |         |            |         
|NOTE RECEIVABLE                                                                                                          |  |         | 105,374    |         
|                                                                                                                         |  |         |            |         
|FURNITURE AND EQUIPMENT, net                                                                                             |  |         | 467,611    |         
|                                                                                                                         |  |         |            |         
|INVESTMENT IN REAL ESTATE                                                                                                |  |         | 169,900    |         
|                                                                                                                         |  |         |            |         
|                                                                                                                         |  | $       | 26,364,191 |         
|                                                                                                                         |  |         |            |         
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                     |  |         |            |         
|CURRENT LIABILITIES                                                                                                      |  |         |            |         
|Accounts payable and accrued liabilities                                                                                 |  | $       | 185,827    |         
|Payable to clearing organization                                                                                         |  |         | 713,122    |         
|Compensation, employee benefits and payroll taxes                                                                        |  |         | 370,658    |         
|Securities sold, not yet purchased, at market value                                                                      |  |         | 93,749     |         
|Income taxes payable                                                                                                     |  |         | 719,251    |         
|                                                                                                                         |  |         |            |         
|Total current liabilities                                                                                                |  |         | 2,082,607  |         
|                                                                                                                         |  |         |            |         
|Deferred income taxes                                                                                                    |  |         | 39,100     |         
|SHAREHOLDERS' EQUITY                                                                                                     |  |         |            |         
|Preferred stock, no par value; authorized, 500,000 shares; issued and outstanding, no shares                             |  |         |           |         
|Common stock, no par value; authorized, 10,000,000 shares; issued and outstanding, 3,276,866 and 3,367,366, respectively |  |         | 1,059,196  |         
|Retained earnings                                                                                                        |  |         | 23,183,288 |         
|                                                                                                                         |  |         |            |         
|Total shareholders' equity                                                                                               |  |         | 24,242,484 |         
|                                                                                                                         |  |         |            |         
|                                                                                                                         |  | $       | 26,364,191 |         
|                                                                                                                         |  |         |            |         

The
accompanying notes are an integral part of these statements.

2

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PAULSON CAPITAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
for the three month periods ended March 31, 2001
and March 31, 2000 (unaudited)

|                                                       |  | 3/31/01 |            | 3/31/00
|------------------------------------------------------ |  | ------- | ---------- | -------
|Revenues                                               |  |         |            |        
|Commissions                                            |  | $       | 1,931,901  |        
|Corporate finance                                      |  |         | 371,382    |        
|Investment income                                      |  |         | (854,566   | )      
|Trading income                                         |  |         | 215,977    |        
|Interest and dividends                                 |  |         | 10,864     |        
|Other                                                  |  |         | 673        |        
|                                                       |  |         |            |        
|                                                       |  |         | 1,676,231  |        
|                                                       |  |         |            |        
|Expenses                                               |  |         |            |        
|Commissions and salaries                               |  |         | 2,016,889  |        
|Underwriting expenses                                  |  |         | 217,397    |        
|Rent, telephone and quotation services                 |  |         | 255,104    |        
|Interest expense                                       |  |         | 3          |        
|Professional fees                                      |  |         | 71,599     |        
|Bad debt expense                                       |  |         | 30,000     |        
|Travel and entertainment                               |  |         | 62,201     |        
|Settlements                                            |  |         | 1,050      |        
|Other                                                  |  |         | 338,816    |        
|                                                       |  |         |            |        
|                                                       |  |         | 2,993,059  |        
|                                                       |  |         |            |        
|Earnings (loss) before income taxes                    |  |         | (1,316,828 | )      
|Provision for income taxes                             |  |         |            |        
|Current                                                |  |         | (526,730   | )      
|Deferred                                               |  |         |           |        
|                                                       |  |         |            |        
|Net Earnings (Loss)                                    |  | $       | (790,098   | )      
|                                                       |  |         |            |        
|Earnings (loss) per share, basic and diluted           |  | $       | (0.24      | )      
|                                                       |  |         |            |        
|Weighted average number of shares outstanding, basic   |  |         | 3,325,833  |        
|Weighted average number of shares outstanding, diluted |  |         | 3,328,349  |        

The
accompanying notes are an integral part of these statements

3

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PAULSON CAPITAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the three year period ended December 31, 2000
and the three months ended March 31, 2001 (unaudited)

|                                                                 |  | Common Stock |   |   |          
|---------------------------------------------------------------- |  | ------------ | - | - | ---------
|
|
|Balance at December 31, 1997                                     |  | 3,970,536    |   |   | 794,416  
|Issuance of common stock in lieu of directors' cash compensation |  | 4,283        |   |   | 16,500   
|Redemption of common stock                                       |  | (177,967     | ) |   | (35,593  
|Net loss for the year                                            |  |             |   |   |         
|                                                                 |  |              |   |   |          
|Balance at December 31, 1998                                     |  | 3,796,852    |   |   | 775,323  
|Issuance of common stock in lieu of directors' cash compensation |  | 1,783        |   |   | 8,500    
|Redemption of common stock                                       |  | (257,400     | ) |   | (51,480  
|Net earnings for the year                                        |  |             |   |   |         
|                                                                 |  |              |   |   |          
|Balance at December 31, 1999                                     |  | 3,541,235    |   | $ | 732,343  
|Stock option grants                                              |  |             |   |   | 317,750  
|Stock options exercised                                          |  | 16,000       |   |   | 71,000   
|Redemption of common stock                                       |  | (189,869     | ) |   | (41,082  
|Net earnings for the year                                        |  |             |   |   |         
|                                                                 |  |              |   |   |          
|Balance at December 31, 2000                                     |  | 3,367,366    |   | $ | 1,080,011
|Redemption of common stock                                       |  | (90,500      | ) |   | (20,815  
|                                                                 |  |              |   |   |          
|                                                                 |  |              |   |   |          
|Net loss for year to date                                        |  |             |   |   |         
|                                                                 |  |              |   |   |          
|Balance at March 31, 2001                                        |  | 3,276,866    |   | $ | 1,059,196
|                                                                 |  |              |   |   |          

The
accompanying notes are an integral part of these statements

4

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PAULSON CAPITAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
for the three month periods ended March 31, 2001 and March 31, 2000

|                                                 |                                                                                                     | 3/31/01                                                         |                                                      | 3/31/00     |           
|------------------------------------------------ | --------------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ---------------------------------------------------- | ----------- | ----------
|Increase (Decrease) in Cash and Cash Equivalents |                                                                                                     |                                                                 |                                                      |             |           
|Cash flows from operating activities             |                                                                                                     |                                                                 |                                                      |             |           
|                                                 | Net earnings (loss)                                                                                 |                                                                 | $                                                    | (790,098    | )         
|                                                 | Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities |                                                                 |                                                      |             |           
|                                                 |                                                                                                     | Unrealized (appreciation) depreciation on investment securities |                                                      |             | 1,707,537 
|                                                 |                                                                                                     | Realized gain on investment securities                          |                                                      |             | (852,971  
|                                                 |                                                                                                     | Depreciation and amortization                                   |                                                      |             | 50,602    
|                                                 |                                                                                                     | Deferred income taxes                                           |                                                      |             |          
|                                                 |                                                                                                     | Change in assets and liabilities                                |                                                      |             |           
|                                                 |                                                                                                     |                                                                 | Receivables                                          |             |           
|                                                 |                                                                                                     |                                                                 | Trading securities                                   |             |           
|                                                 |                                                                                                     |                                                                 | Prepaid and deferred expenses                        |             |           
|                                                 |                                                                                                     |                                                                 | Accounts payable and accrued liabilities             |             |           
|                                                 |                                                                                                     |                                                                 | Securities sold, not yet purchased                   |             |           
|                                                 |                                                                                                     |                                                                 | Income taxes payable                                 |             |           
|                                                 |                                                                                                     |                                                                 |                                                      |             |           
|                                                 | Net cash provided by (used in) operating activities                                                 |                                                                 |                                                      | 2,138,499   |           
|                                                 |                                                                                                     |                                                                 |                                                      |             |           
|Cash flows from investing activities             |                                                                                                     |                                                                 |                                                      |             |           
|                                                 | Purchases of investment securities                                                                  |                                                                 |                                                      | (10,890,701 | )         
|                                                 | Proceeds from sale of investment securities                                                         |                                                                 |                                                      | 9,270,619   |           
|                                                 | Additions to furniture and equipment                                                                |                                                                 |                                                      | (8,538      | )         
|                                                 | Proceeds from sale of furniture and equipment                                                       |                                                                 |                                                      |            |           
|                                                 |                                                                                                     |                                                                 |                                                      |             |           
|                                                 |                                                                                                     | Net cash provided by (used in) investing activities             |                                                      | $           | (1,628,620
|                                                 |                                                                                                     |                                                                 |                                                      |             |           
|Cash flows from financing activities             |                                                                                                     |                                                                 |                                                      |             |           
|                                                 | Proceeds from exercise of stock options                                                             |                                                                 |                                                      |            |           
|                                                 | Payments to retire common stock                                                                     |                                                                 |                                                      | (486,248    | )         
|                                                 | Decrease in bank overdraft payable                                                                  |                                                                 |                                                      |            |           
|                                                 |                                                                                                     |                                                                 |                                                      |             |           
|                                                 |                                                                                                     | Net cash provided by (used in) financing activities             |                                                      |             | (486,248  
|                                                 |                                                                                                     |                                                                 |                                                      |             |           
|                                                 |                                                                                                     |                                                                 | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |             |           
|Cash and cash equivalents at beginning of period |                                                                                                     |                                                                 | 104,309                                              |             |           
|                                                 |                                                                                                     |                                                                 |                                                      |             |           
|Cash and cash equivalents at March 31            |                                                                                                     | $                                                               | 127,940                                              |             | $         
|                                                 |                                                                                                     |                                                                 |                                                      |             |           
|Cash paid during the three months for            |                                                                                                     |                                                                 |                                                      |             |           
|                                                 | Interest                                                                                            |                                                                 | $                                                    | 3           |           
|                                                 |                                                                                                     |                                                                 |                                                      |             |           
|                                                 | Income taxes                                                                                        |                                                                 | $                                                    | 2,650,019   |           
|                                                 |                                                                                                     |                                                                 |                                                      |             |           

The
accompanying notes are an integral part of these statements

5

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)

1. Basis of Presentation

The
accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for interim financial statements in Article 10 of
Regulation S-X and, therefore, do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of
management, the interim financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to state fairly the information shown therein. The nature of the
Company's business is such that the results of any interim period are not necessarily indicative of results for a full fiscal year.

2. Securities Owned

Any
losses from the disposition of securities are reflected in trading revenues on the income statement for the period.

3. Commitments and Contingencies

In
October 1998, Russell W. Cummings, a former PIC customer, filed a lawsuit in California state court asserting claims against PIC and a former PIC registered representative
alleging violations of the California Consumers Legal Remedies Act, fraud, negligent misrepresentation, breach of contract, tortious breach of the implied covenant of good faith and fair dealing,
breach of fiduciary duty and negligence. Plaintiff had agreed to arbitrate the matter before the NASD but never did so. Consequently, in July 2000, the California state court dismissed the
case. In November 2000, the California state court reinstated the case and, in January 2001, Cummings filed an arbitration claim against PIC and its former registered representative. The
complaint seeks $250,000 in actual damages and $1,500,000 in punitive damages. PIC has not had an opportunity to fully investigate this claim, but believes it has meritorious defenses and intends to
defend this matter vigorously.

In
August 2000, Patricia Staples, a former PIC customer, filed an NASD arbitration claim against PIC and one of its registered representatives alleging that PIC and its
registered representative made certain misrepresentations and committed violations of law. Claimant is seeking $100,000 in compensatory and punitive damages. Claimant's statement of claim is vague and
does not specify the alleged misrepresentations or violations of law. PIC has filed a motion to require a more definite and certain statement of claim by claimant. PIC also has filed an answer denying
any liability. PIC has not had an opportunity to fully investigate this matter but intends to defend this matter vigorously.

In
January 2001, V.J.E. Enterprises, Inc. and Vincent and Diana Nartker, former PIC customers, filed a complaint with PIC regarding the handling of their account by PIC
and one of its registered representatives. They have asserted that their account was mismanaged and that PIC failed to supervise its registered representative. They have requested that PIC pay them
$275,100. PIC has not had an opportunity to fully investigate this claim, but believes it has meritorious defenses and intends to defend this matter vigorously if an arbitration is filed.

In
April 2001, Michael Swan, a PIC customer, complained that a PIC broker failed to place a stop loss order on a stock that Swan held in one of his PIC accounts. The price of
the stock subsequently declined significantly and Swan now claims that PIC and its broker failed to place the stop loss, resulting in a loss of $125,000. Swan has demanded that PIC pay this amount to
him. PIC has not had an opportunity to fully investigate this claim.

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An adverse outcome in certain of the matters described above could have a material adverse effect on PIC or the Company. PIC has been named in certain other legal proceedings and has
received notice that certain customers may commence legal proceedings against PIC. The Company believes, based upon information received to date and, where the Company believes it appropriate,
discussions with legal counsel, that resolution of this additional pending or threatened litigation will have no material adverse effect on the consolidated financial condition, results of operations,
or business of the Company.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.

|      |  |                |  | PAULSON CAPITAL CORP.
|----- |  | -------------- |  | ---------------------
|Date: |  | August 3, 2001 |  | By:                  

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