Summary of PAULSON CAPITAL CORP

Entry into a Material Definitive Agreement, Completion of Acquisition or Dis

Item 1.01 Entry into a Material Definitive Agreement

On April 10, 2012, Paulson Investment Company, Inc. ("PIC"), the operating subsidiary of Paulson Capital Corp. (the "Registrant"), entered into an asset purchase agreement (the "Agreement") among it, the Registrant and JHS Capital Advisors, LLC ("JHS"), for the sale of PIC's retail brokerage business to JHS (the "Sale"). The Sale included the transfer to JHS of sixty-six registered representatives, together with managed brokerage accounts, and nine administrative employees and closed on April 16, 2012.

Under the Agreement, PIC is to be paid approximately $1,653,247 in consideration for the Sale net of certain deductions for compensation expenses. $1,107,741, was paid to PIC at closing on April 16, 2012, and the balance is to be paid over three installments on July 16, 2012, October 15, 2012 and January 11, 2013. These installment payments to PIC are supported by a standby letter of credit issued in favor of PIC. The final purchase price is subject to recalculation after six months based upon the aggregate gross dealer commissions for the twelve month period ended at that time.

The Agreement required PIC and the Registrant to make customary representations and warranties relating to, among other things, their organization and authority, absence of certain changes, and receipt of any necessary governmental or third party consents, including the approval of the Financial Industry Regulatory Authority. The Agreement also requires twelve directors, officers and employees of PIC and the Registrant to enter into non-solicitation and non-competition agreements pursuant to which they are prohibited from soliciting employees and registered representatives of JHS for two years from the closing date and, subject to a limited exception, engaging in the retail brokerage business for one year from the closing date.

In connection with the closing, PIC issued a press release regarding the Sale. The press release is included as Exhibit 99.1 to this Current Report on Form 8-K.