##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
 For the quarterly period ended September 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 Commission File Number 000-26667
 CRAFTMADE INTERNATIONAL, INC.
  DELAWARE
    
    75-2057054(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. employer
identification no.)
 650 SOUTH ROYAL LANE, SUITE 100
COPPELL, TEXAS
75019
 (972) 393-3800
  þ o
  o þ o
 o þ




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##### Table of Contents



CRAFTMADE INTERNATIONAL, INC.
AND SUBSIDIARIES
 TABLE OF CONTENTS
 Part I.
    
    Financial InformationItem 1.
    
    Financial StatementsItem 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of OperationsItem 3.
    
    Quantitative and Qualitative Disclosures About Market RiskItem 4.
    
    Evaluation of Disclosure Controls and ProceduresPart II.
    
    Other InformationItem 1.
    
    Legal ProceedingsItem 1A.
    
    Risk FactorsItem 2.
    
    Unregistered Sales of Equity Securities and Use of ProceedsItem 3.
    
    Defaults Upon Senior SecuritiesItem 4.
    
    Submission of Matters to a Vote of Security HoldersItem 5.
    
    Other InformationItem 6.
    
    ExhibitsCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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PART I
FINANCIAL INFORMATION
 
  CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Three Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005Net sales
    
    $
    28,126
    
    
    $
    31,024Cost of goods sold
    
    
    (19,344
    )
    
    
    (22,278
    )Gross profit
    
    
    8,782
    
    
    
    8,746Gross profit as a percentage of net sales
    
    
    31.2
    %
    
    
    28.2
    %Selling, general and administrative expenses
    
    
    (5,084
    )
    
    
    (4,898
    )Depreciation and amortization
    
    
    (200
    )
    
    
    (158
    )Total operating expenses
    
    
    (5,284
    )
    
    
    (5,056
    )Income from operations
    
    
    3,498
    
    
    
    3,690Interest expense, net
    
    
    (368
    )
    
    
    (304
    )Income before income taxes and minority interests
    
    
    3,130
    
    
    
    3,386Income taxes
    
    
    (981
    )
    
    
    (920
    )Income before minority interests
    
    
    2,149
    
    
    
    2,466Minority interests
    
    
    (265
    )
    
    
    (734
    )Net income
    
    $
    1,884
    
    
    $
    1,732Weighted average common shares outstanding:Basic
    
    
    5,204
    
    
    
    5,200Diluted
    
    
    5,215
    
    
    
    5,210Basic earnings per common share
    
    $
    0.36
    
    
    $
    0.33Diluted earnings per common share
    
    $
    0.36
    
    
    $
    0.33Cash dividends declared per common share
    
    $
    0.12
    
    
    $
    0.12
 
 1




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 ASSETS
 September 30,
    
    
    June 30,2006
    
    
    2006(Unaudited)Current assetsCash
    
    $
    755
    
    
    $
    2,164Accounts receivable  net of allowance
of $254 and $293, respectively
    
    
    18,114
    
    
    
    19,802Inventories  net of allowance of $665
and $934, respectively
    
    
    22,846
    
    
    
    21,085Deferred income taxes
    
    
    1,149
    
    
    
    1,252Prepaid expenses and other current assets
    
    
    909
    
    
    
    988Total current assets
    
    
    43,773
    
    
    
    45,291Property and equipmentLand
    
    
    1,535
    
    
    
    1,535Building
    
    
    7,796
    
    
    
    7,796Office furniture and equipment
    
    
    3,723
    
    
    
    3,320Leasehold improvements
    
    
    187
    
    
    
    18713,241
    
    
    
    12,838Less: accumulated depreciation
    
    
    (4,888
    )
    
    
    (4,740
    )Total property and equipment, net
    
    
    8,353
    
    
    
    8,098Other assetsGoodwill
    
    
    12,247
    
    
    
    11,480Other intangibles, net of accumulated amortization
of $92 and $41, respectively
    
    
    1,877
    
    
    
    169Other assets
    
    
    10
    
    
    
    23Total other assets
    
    
    14,134
    
    
    
    11,672Total assets
    
    $
    66,260
    
    
    $
    65,061
 
 2




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##### Table of Contents



CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
 LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS EQUITY
 September 30,
    
    
    June 30,2006
    
    
    2006UnauditedCurrent liabilitiesBook overdrafts
    
    $
    38
    
    
    $
    70Notes payable  current
    
    
    1,083
    
    
    
    1,135Revolving lines of credit
    
    
    
    
    
    
    2,173Accounts payable
    
    
    7,096
    
    
    
    7,544Commissions payable
    
    
    212
    
    
    
    274Income taxes payable
    
    
    500
    
    
    
    114Accrued customer allowances
    
    
    2,117
    
    
    
    2,637Other accrued expenses
    
    
    1,083
    
    
    
    1,073Total current liabilities
    
    
    12,129
    
    
    
    15,020Other non-current liabilitiesRevolving line of credit
    
    
    19,398
    
    
    
    15,981Other long-term expenses
    
    
    793
    
    
    
    793Deferred income taxes
    
    
    686
    
    
    
    345Notes payable  long term
    
    
    
    
    
    
    223Total other non-current liabilities
    
    
    20,877
    
    
    
    17,342Total liabilities
    
    
    33,006
    
    
    
    32,362Minority interests
    
    
    2,955
    
    
    
    3,662Commitments and contingencies (Note 5)Stockholders equitySeries A cumulative, convertible callable preferred
stock, $1.00 par value, 2,000,000 shares authorized;
nil shares issued
    
    
    
    
    
    
    Common stock, $0.01 par value, 15,000,000
shares authorized; 9,703,420 shares issued
    
    
    97
    
    
    
    97Additional paid-in capital
    
    
    17,760
    
    
    
    17,757Retained earnings
    
    
    50,568
    
    
    
    49,309Less: treasury stock, 4,499,920 common
shares at cost
    
    
    (38,126
    )
    
    
    (38,126
    )Total stockholders equity
    
    
    30,299
    
    
    
    29,037Total liabilities, minority interests and stockholders equity
    
    $
    66,260
    
    
    $
    65,061
 
 3




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Three Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005Net cash provided by operating activities
    
    $
    1,207
    
    
    $
    3,642Cash flows from investing activitiesAcquisition of Marketing Impressions, Inc.Initial payment, net of cash acquired
    
    
    (1,391
    )
    
    
    Additional contingent consideration
    
    
    (375
    )
    
    
    Additions to property and equipment
    
    
    (190
    )
    
    
    (36
    )Cash used in investing activities
    
    
    (1,956
    )
    
    
    (36
    )Cash flows from financing activitiesNet proceeds from/(payments on) lines of credit
    
    
    1,244
    
    
    
    (8,010
    )Principal payments on notes payable
    
    
    (275
    )
    
    
    (540
    )Distributions to minority interest members
    
    
    (972
    )
    
    
    Cash dividends
    
    
    (624
    )
    
    
    (531
    )Decrease in book overdrafts
    
    
    (33
    )
    
    
    (216
    )Net cash used in financing activities
    
    
    (660
    )
    
    
    (9,297
    )Net decrease in cash
    
    
    (1,409
    )
    
    
    (5,691
    )Cash at beginning of period
    
    
    2,164
    
    
    
    9,145Cash at end of period
    
    $
    755
    
    
    $
    3,454
 
 4




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2006 (Unaudited)
      5




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2006 (Unaudited)
  before
  Purchase Price Summary
(In thousands)
 As of September 30, 2006:Amount paid at closing, net of cash acquired
    
    $
    1,287Contingent payments earned
    
    
    547Acquisition-related costs
    
    
    150Total consideration as of September 30, 2006
    
    $
    1,984Percent of Adjusted Gross Profit
July 1, 2006 to August 31, 2011
    
    
    22
    %Additional Percent of Adjusted Gross Profit
July 1, 2006 to June 30, 2007 (not to exceed $750,000)
    
    
    15
    %
 Business Combinations
 6




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2006 (Unaudited)
  Preliminary Purchase Price Allocation
(In thousands)
 Assets:Accounts receivable
    
    $
    368Inventory
    
    
    2Property and equipment
    
    
    214Acquired intangibles
    
    
    1,759Goodwill
    
    
    7683,111Liabilities:Accounts payable
    
    
    1,120Note payable
    
    
    71,127Total purchase price as of September 30, 2006
    
    $
    1,984
  Summary of Acquired Intangibles
(In thousands)
 Life
    
    Grossin Years
    
    AmountPatents and trademarks
    
    15
    
    $
    1,000Non-compete covenants
    
    7
    
    
    759$
    1,759
   7




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2006 (Unaudited)
  Unaudited Pro Forma Results
(In thousands, except per share data)
 Three Months EndedSeptember 30,
    
    September 30,2006
    
    2005Net sales(1)As reported
    
    $
    28,126
    
    
    $
    31,024Pro forma
    
    
    28,126
    
    
    
    31,024Net income(2)As reported
    
    $
    1,884
    
    
    $
    1,732Pro forma
    
    
    1,884
    
    
    
    2,010Diluted earnings per shareAs reported
    
    $
    0.36
    
    
    $
    0.33Pro forma
    
    
    0.36
    
    
    
    0.38
 
 (1)
    
    Since net sales of Marketing Impressions, Inc.
represent sales to Craftmade, they eliminate in
consolidation. Net sales of PHI have always been
included in consolidated net sales of the Company in
accordance with FIN46. Accordingly, pro forma net sales
equal actual net sales.(2)
    
    Pro forma net income includes the remaining
50% net income of PHI (minority interest portion) plus
additional gross margin for certain products, less
interest, depreciation, amortization, and consulting
fees. 8




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2006 (Unaudited)
   Three Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005(In thousands, except per share data)Basic and diluted earnings per share:NumeratorNet income
    
    $
    1,884
    
    
    $
    1,732Denominator for basic EPSWeighted average common shares outstanding
    
    
    5,204
    
    
    
    5,200Denominator for diluted EPSWeighted average common shares outstanding
    
    
    5,204
    
    
    
    5,200Incremental shares for stock options
    
    
    11
    
    
    
    10Potentially dilutive weighted average common shares
    
    
    5,215
    
    
    
    5,210Basic earnings per share
    
    $
    0.36
    
    
    $
    0.33Diluted earnings per share
    
    $
    0.36
    
    
    $
    0.33
 9




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2006 (Unaudited)
     Summary of Segment Information
 Three Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005(In thousands)Net salesCraftmade
    
    $
    16,451
    
    
    $
    16,511TSI
    
    
    11,675
    
    
    
    14,513Total
    
    $
    28,126
    
    
    $
    31,024Income from operationsCraftmade
    
    $
    1,975
    
    
    $
    2,382TSI
    
    
    1,523
    
    
    
    1,308Total
    
    $
    3,498
    
    
    $
    3,690Net incomeCraftmade
    
    $
    1,075
    
    
    $
    1,345TSI
    
    
    809
    
    
    
    387Total
    
    $
    1,884
    
    
    $
    1,732
   10




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Cautionary Statement
  Critical Accounting Policies and Estimates
  11




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Recent Accounting Pronouncements
  Results of Operations
  Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005
  Summary Income Statement by Segment
(Dollars in thousands)
 Three Months Ended
    
    
    Three Months EndedSeptember 30, 2006
    
    
    September 30, 2005Craftmade
    
    
    TSI
    
    
    Total
    
    
    Craftmade
    
    
    TSI
    
    
    TotalNet sales
    
    $
    16,451
    
    
    $
    11,675
    
    
    $
    28,126
    
    
    $
    16,511
    
    
    $
    14,513
    
    
    $
    31,024Cost of goods sold
    
    
    (10,699
    )
    
    
    (8,645
    )
    
    
    (19,344
    )
    
    
    (10,650
    )
    
    
    (11,628
    )
    
    
    (22,278
    )Gross profit
    
    
    5,752
    
    
    
    3,030
    
    
    
    8,782
    
    
    
    5,861
    
    
    
    2,885
    
    
    
    8,746Gross profit as a % of net sales
    
    
    35.0
    %
    
    
    26.0
    %
    
    
    31.2
    %
    
    
    35.5
    %
    
    
    19.9
    %
    
    
    28.2
    %Selling, general and administrative
    
    
    (3,638
    )
    
    
    (1,446
    )
    
    
    (5,084
    )
    
    
    (3,331
    )
    
    
    (1,567
    )
    
    
    (4,898
    )As a % of net sales
    
    
    22.1
    %
    
    
    12.4
    %
    
    
    18.1
    %
    
    
    20.2
    %
    
    
    10.8
    %
    
    
    15.8
    %Depreciation and amortization
    
    
    (139
    )
    
    
    (61
    )
    
    
    (200
    )
    
    
    (148
    )
    
    
    (10
    )
    
    
    (158
    )Total operating expenses
    
    
    (3,777
    )
    
    
    (1,507
    )
    
    
    (5,284
    )
    
    
    (3,479
    )
    
    
    (1,577
    )
    
    
    (5,056
    )Income from operations
    
    
    1,975
    
    
    
    1,523
    
    
    
    3,498
    
    
    
    2,382
    
    
    
    1,308
    
    
    
    3,690Interest expense, net
    
    
    (337
    )
    
    
    (31
    )
    
    
    (368
    )
    
    
    (278
    )
    
    
    (26
    )
    
    
    (304
    )Income before income taxes
and minority interests
    
    
    1,638
    
    
    
    1,492
    
    
    
    3,130
    
    
    
    2,104
    
    
    
    1,282
    
    
    
    3,386Provision for income taxes
    
    
    (563
    )
    
    
    (418
    )
    
    
    (981
    )
    
    
    (759
    )
    
    
    (161
    )
    
    
    (920
    )Income before minority interests
    
    
    1,075
    
    
    
    1,074
    
    
    
    2,149
    
    
    
    1,345
    
    
    
    1,121
    
    
    
    2,466Minority interests
    
    
    
    
    
    
    (265
    )
    
    
    (265
    )
    
    
    
    
    
    
    (734
    )
    
    
    (734
    )Net income
    
    $
    1,075
    
    
    $
    809
    
    
    $
    1,884
    
    
    $
    1,345
    
    
    $
    387
    
    
    $
    1,732
 12




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Net Sales.
   
 Net Sales of TSI Segment
(Dollars in thousands)
 Trade
    
    
    Design
    
    
    SegmentThree Months Ended
    
    Source(1)
    
    
    Trends
    
    
    TotalSeptember 30, 2006
    
    $
    7,382
    
    
    $
    4,293
    
    
    $
    11,675September 30, 2005
    
    
    8,834
    
    
    
    5,679
    
    
    
    14,513Dollar increase/(decrease)
    
    $
    (1,452
    )
    
    $
    (1,386
    )
    
    $
    (2,838
    )Percent increase/(decrease)
    
    
    (16.4
    %)
    
    
    (24.4
    %)
    
    
    (19.6
    %)
 
 (1)
    
    Includes 100% of net sales of PHI, which Trade Source gained 100%
control effective July 1, 2006 through its acquisition of Marketing Impressions, Inc. Net sales of
PHI have always been consolidated into the result of the TSI segment in accordance with FIN 46R.   13




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Gross Profit.
   14




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##### Table of Contents



Gross Profit as a Percentage of Net Sales of TSI
 Trade
    
    Design
    

SegmentThree Months Ended
    
    Source(1)
    
    Trends
    
    TotalSeptember 30, 2006
    
    
    28.4
    %
    
    
    21.8
    %
    
    
    26.0
    %September 30, 2005
    
    
    19.3
    %
    
    
    20.8
    %
    
    
    19.9
    %Percent increase/(decrease)
    
    
    9.1
    %
    
    
    1.0
    %
    
    
    6.1
    %
 
 (1)
    
    Includes 100% of gross profit of PHI which Trade Source gained 100% control
effective July 1, 2006 through its acquisition of Marketing Impressions, Inc. Gross profit of PHI
have always been consolidated into the result of the TSI segment in accordance with FIN 46R.   Selling, General and Administrative Expenses.
 Selling, General and Administrative Expenses
(Dollars in thousands)
 Increase/(Decrease)Three Months Ended
    
    
    OverSeptember 30,
    
    
    September 30,
    
    
    Prior Year2006
    
    
    2005
    
    
    PeriodSalaries and wages
    
    $
    1,677
    
    
    $
    1,693
    
    
    $
    (16
    )Accounting and legal
    
    
    198
    
    
    
    388
    
    
    
    (190
    )Other
    
    
    3,209
    
    
    
    2,817
    
    
    
    392$
    5,084
    
    
    $
    4,898
    
    
    $
    186
 15




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Depreciation and Amortization.
 Interest Expense.
 Minority Interests.
 Provision for Income Taxes.
 Liquidity and Capital Resources
   16




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Outstanding Debt
  Summary of Revolving Lines of Credit and Notes Payable
At September 30, 2006
 OutstandingCommitment
    
    Balance
    
    
    Interest Rate
    
    MaturityRevolving line of credit
    
    $30,000,000
    
    $
    19,398,000
    
    
    LIBOR plus 1.50%
    
    September 1, 2009Note payable  facility
    
    N/A
    
    
    1,083,000
    
    
    8.302%
    
    January 1, 2008$
    20,481,000
   17




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency Risk
   18




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USD:TWD
    
    USD:YUANJune 30, 2005
    
    31.665
    
    8.287September 30, 2005
    
    33.270
    
    8.110December 31, 2005
    
    32.951
    
    8.073March 31, 2006
    
    32.568
    
    8.035June 30, 2006
    
    32.619
    
    8.006September 30, 2006
    
    33.119
    
    7.917
  . These amounts are not consistent with future
purchases, as the Company transitions more of its production to manufacturers located in
China
 Summary of Foreign Purchases
Quarter Ended September 30, 2006
(Dollars in thousands)
 China
    
    $
    11,888Taiwan
    
    
    3,998
  Hypothetical Appreciation of Foreign Currencies
(Dollars in thousands)
 Annual
    
    AnnualForeign
    
    Increase in
    
    Decrease inCurrency
    
    Cost of
    
    NetAppreciation
    
    Sales
    
    Income1
    %
    
    $
    476
    
    
    $
    2865
    %
    
    
    2,772
    
    
    
    1,702
  19




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Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Controls
  
 PART II
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  20




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Item 5. Other Information
  
 Item 6. Exhibits
 2.1
    
    Stock Purchase Agreement between Craftmade International, Inc., Trade
Source International, Inc., and Robert W. Lackey, dated September 15, 2006,
previously filed as Exhibit 10.1 to Form 8-K dated September 15, 2006 (File No.
000-26667), and incorporated by reference herein.Pursuant to Item 601(b)(2) of Regulation S-K, the Company has not filed herewith
the schedules and exhibits to the foregoing exhibit and agrees to furnish
supplementally to the Securities and Exchange Commission, upon request, any
omitted schedules or similar attachments to the foregoing exhibit.2.2
    
    Agreement for the Purchase and Sale of Personal Goodwill between Trade
Source International, Inc. and Robert Lackey, dated September 15, 2006, previously
filed as Exhibit 10.2 to Form 8-K dated September 15, 2006 (File No. 000-26667), and
incorporated by reference herein.2.3
    
    Agreement for the Purchase and Sale of Personal Goodwill between Trade
Source International, Inc. and Robert Lackey, Jr., dated September 15, 2006,
previously filed as Exhibit 10.3 to Form 8-K dated September 15, 2006 (File No.
000-26667), and incorporated by reference herein.2.4
    
    Intellectual Property Assignment by and between Trade Source International,
Inc., Robert W. Lackey, Robert W. Lackey, Jr., RWL Incorporated f/k/a Robert W.
Lackey Corporation and R.L. Products Corporation, dated September 15, 2006,
previously filed as Exhibit 10.4 to Form 8-K dated September 15, 2006 (File No.
000-26667), and incorporated by reference herein.2.5
    
    Non-Competition Agreement between Trade Source International, Inc. and
Robert W. Lackey, dated September 15, 2006, previously filed as Exhibit 10.5 to Form
8-K dated September 15, 2006 (File No. 000-26667), and incorporated by reference
herein.2.6
    
    Non-Competition Agreement between Trade Source International and Robert W.
Lackey, Jr., dated September 15, 2006, previously filed as Exhibit 10.6 to Form 8-K
dated September 15, 2006 (File No. 000-26667), and incorporated by reference herein.2.7
    
    Consulting Agreement by and between Craftmade International, Inc., Trade
Source International, Inc. and Imagine One Resources, LLC, dated September 15, 2006,
previously filed as Exhibit 10.7 to Form 8-K dated September 15, 2006 (File No.
000-26667), and incorporated by reference herein.2.8
    
    Partially Subordinate Security Agreement among Trade Source International,
Inc., Marketing Impressions, Inc., Prime Home Impressions, LLC, and Robert Lackey,
(Lackey), as collateral agent for Lackey, Robert W. Lackey, Jr., Imagine One
Resources, LLC, RWL Corporation and R.L. Products Corporation, dated September 15,
2006, previously filed as Exhibit 10.8 to Form 8-K dated September 15, 2006 (File No.
000-26667), and incorporated by reference herein.
 21




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##### Table of Contents



2.9
    
    Subordination Agreement by and among Robert W. Lackey (Lackey), as
collateral agent for Lackey, Robert W. Lackey, Jr., Imagine One Resources, LLC, RWL
Corporation, R.L. Products Corporation, and The Frost National Bank, Trade Source
International, Inc., Marketing Impressions, Inc., Prime/Home Impressions, LLC and
Craftmade International, Inc., dated September 15, 2006, previously filed as Exhibit
10.9 to Form 8-K dated September 15, 2006 (File No. 000-26667), and incorporated by
reference herein.2.10
    
    Agreement and Plan of Merger by and among Craftmade International, Inc.,
Bill Teiber Co., Inc., Teiber Lighting Products, Inc., Todd Teiber and Edward
Oberstein dated March 1, 2005, previously filed as Exhibit 10.1 to Form 8-K dated
March 1, 2005 (File No. 000-26667), and incorporated by reference herein.2.11
    
    Agreement and Plan of Merger, dated as of July 1, 1998, by and among
Craftmade International, Inc., Trade Source International, Inc. a Delaware
corporation, Neall and Leslie Humphrey, John DeBlois, the Wiley Family Trust, James
Bezzerides, the Bezzco Inc. Employee Retirement Trust and Trade Source International,
Inc, a California corporation, filed as Exhibit 2.1 to the Companys Current Report
on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and incorporated by reference
herein.3.1
    
    Certificate of Incorporation of the Company, filed as Exhibit 3(a)(2) to
the Companys Post Effective Amendment No. 1 to Form S-18 (File No. 33-33594-FW), and
incorporated by reference herein.3.2
    
    Certificate of Amendment of Certificate of Incorporation of the Company,
dated March 24, 1992, and filed as Exhibit 4.2 to the Companys Form S-8 (File No.
333-44337), and incorporated by reference herein.3.3
    
    Amended and Restated Bylaws of the Company, filed as Exhibit 3(b)(2) to the
Companys Post Effective Amendment No. 1 to Form S-8 (File No. 33-33594-FW), and
incorporated by reference herein.4.1
    
    Specimen Common Stock Certificate, filed as Exhibit 4.4 to the Companys
registration statement on Form S-3 (File No. 333-70823), and incorporated by
reference herein.4.2
    
    Rights Agreement, dated as of June 23, 1999, between Craftmade
International, Inc. and Harris Trust and Savings Bank, as Rights Agent, previously
filed as an exhibit to Form 8-K dated July 9, 1999 (File No. 000-26667), and
incorporated by reference herein.10.1
    
    Assignment of Rents and Leases dated December 21, 1995, between Craftmade
International, Inc. and Allianz Life Insurance Company of North America (including
exhibits), previously filed as an exhibit in Form 10Q for the quarter ended December
31, 1995, and herein incorporated by reference.10.2
    
    Deed of Trust, Mortgage and Security Agreement made by Craftmade
International, Inc., dated December 21, 1995, to Patrick M. Arnold, as trustee for
the benefit of Allianz Life Insurance Company of North America (including exhibits),
previously filed as an exhibit in Form 10-Q for the quarter ended December 31, 1995,
and herein incorporated by reference.
 22




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##### Table of Contents



10.3
    
    Craftmade International, Inc. 1999 Stock Option Plan, filed as Exhibit A to
the Companys Proxy Statement on Schedule 14A filed October 4, 2000 (File No.
000-26667) and herein incorporated by reference.10.4
    
    Craftmade International, Inc. 2000 Non-Employee Director Stock Plan, filed
as Exhibit B to the Companys Proxy Statement on Schedule 14A filed October 4, 2000
(File No. 000-26667) and herein incorporated by reference.10.5
    
    Second Amended and Restated Loan Agreement with Frost dated September 18,
2006, previously filed as Exhibit 10.1 to Form 8-K dated September 18, 2006 (File No.
000-26667), and incorporated by reference herein.10.6
    
    Revolving Promissory Note (the Note) with dated September 18, 2006,
previously filed as Exhibit 10.2 to Form 8-K dated September 18, 2006 (File No.
000-26667), and incorporated by reference herein.31.1*
    
    Certification of James R. Ridings, Chief Executive Officer of the Company, pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of J. Marcus Scrudder, Chief Financial Officer of the
Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of James R. Ridings, Chairman of the Board, President and
Chief Executive Officer of the Company, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.2*
    
    Certification of J. Marcus Scrudder, Chief Financial Officer of the
Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Each document marked with an asterisk is filed or furnished herewith. 23




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##### Table of Contents



SIGNATURES
  CRAFTMADE INTERNATIONAL, INC.(Registrant)Date: November 8, 2006
    
    /s/ James R. Ridings
JAMES R. RIDINGS
Chairman of the Board and
Chief Executive OfficerDate: November 8, 2006
    
    /s/ J. Marcus Scrudder
J. MARCUS SCRUDDER
Chief Financial Officer
 24




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##### Table of Contents



Index to Exhibits
 ExhibitNumber
    
    Description
 2.1
    
    Stock Purchase Agreement between Craftmade International, Inc., Trade
Source International, Inc., and Robert W. Lackey, dated September 15, 2006,
previously filed as Exhibit 10.1 to Form 8-K dated September 15, 2006 (File No.
000-26667), and incorporated by reference herein.Pursuant to Item 601(b)(2) of Regulation S-K, the Company has not filed herewith
the schedules and exhibits to the foregoing exhibit and agrees to furnish
supplementally to the Securities and Exchange Commission, upon request, any
omitted schedules or similar attachments to the foregoing exhibit.2.2
    
    Agreement for the Purchase and Sale of Personal Goodwill between Trade
Source International, Inc. and Robert Lackey, dated September 15, 2006, previously
filed as Exhibit 10.2 to Form 8-K dated September 15, 2006 (File No. 000-26667), and
incorporated by reference herein.2.3
    
    Agreement for the Purchase and Sale of Personal Goodwill between Trade
Source International, Inc. and Robert Lackey, Jr., dated September 15, 2006,
previously filed as Exhibit 10.3 to Form 8-K dated September 15, 2006 (File No.
000-26667), and incorporated by reference herein.2.4
    
    Intellectual Property Assignment by and between Trade Source International,
Inc., Robert W. Lackey, Robert W. Lackey, Jr., RWL Incorporated f/k/a Robert W.
Lackey Corporation and R.L. Products Corporation, dated September 15, 2006,
previously filed as Exhibit 10.4 to Form 8-K dated September 15, 2006 (File No.
000-26667), and incorporated by reference herein.2.5
    
    Non-Competition Agreement between Trade Source International, Inc. and
Robert W. Lackey, dated September 15, 2006, previously filed as Exhibit 10.5 to Form
8-K dated September 15, 2006 (File No. 000-26667), and incorporated by reference
herein.2.6
    
    Non-Competition Agreement between Trade Source International and Robert W.
Lackey, Jr., dated September 15, 2006, previously filed as Exhibit 10.6 to Form 8-K
dated September 15, 2006 (File No. 000-26667), and incorporated by reference herein.2.7
    
    Consulting Agreement by and between Craftmade International, Inc., Trade
Source International, Inc. and Imagine One Resources, LLC, dated September 15, 2006,
previously filed as Exhibit 10.7 to Form 8-K dated September 15, 2006 (File No.
000-26667), and incorporated by reference herein.2.8
    
    Partially Subordinate Security Agreement among Trade Source International,
Inc., Marketing Impressions, Inc., Prime Home Impressions, LLC, and Robert Lackey,
(Lackey), as collateral agent for Lackey, Robert W. Lackey, Jr., Imagine One
Resources, LLC, RWL Corporation and R.L. Products Corporation, dated September 15,
2006, previously filed as Exhibit 10.8 to Form 8-K dated September 15, 2006 (File No.
000-26667), and incorporated by reference herein.
 25




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##### Table of Contents



2.9
    
    Subordination Agreement by and among Robert W. Lackey (Lackey), as
collateral agent for Lackey, Robert W. Lackey, Jr., Imagine One Resources, LLC, RWL
Corporation, R.L. Products Corporation, and The Frost National Bank, Trade Source
International, Inc., Marketing Impressions, Inc., Prime/Home Impressions, LLC and
Craftmade International, Inc., dated September 15, 2006, previously filed as Exhibit
10.9 to Form 8-K dated September 15, 2006 (File No. 000-26667), and incorporated by
reference herein.2.10
    
    Agreement and Plan of Merger by and among Craftmade International, Inc.,
Bill Teiber Co., Inc., Teiber Lighting Products, Inc., Todd Teiber and Edward
Oberstein dated March 1, 2005, previously filed as Exhibit 10.1 to Form 8-K dated
March 1, 2005 (File No. 000-26667), and incorporated by reference herein.2.11
    
    Agreement and Plan of Merger, dated as of July 1, 1998, by and among
Craftmade International, Inc., Trade Source International, Inc. a Delaware
corporation, Neall and Leslie Humphrey, John DeBlois, the Wiley Family Trust, James
Bezzerides, the Bezzco Inc. Employee Retirement Trust and Trade Source International,
Inc, a California corporation, filed as Exhibit 2.1 to the Companys Current Report
on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and incorporated by reference
herein.3.1
    
    Certificate of Incorporation of the Company, filed as Exhibit 3(a)(2) to
the Companys Post Effective Amendment No. 1 to Form S-18 (File No. 33-33594-FW), and
incorporated by reference herein.3.2
    
    Certificate of Amendment of Certificate of Incorporation of the Company,
dated March 24, 1992, and filed as Exhibit 4.2 to the Companys Form S-8 (File No.
333-44337), and incorporated by reference herein.3.3
    
    Amended and Restated Bylaws of the Company, filed as Exhibit 3(b)(2) to the
Companys Post Effective Amendment No. 1 to Form S-8 (File No. 33-33594-FW), and
incorporated by reference herein.4.3
    
    Specimen Common Stock Certificate, filed as Exhibit 4.4 to the Companys
registration statement on Form S-3 (File No. 333-70823), and incorporated by
reference herein.4.4
    
    Rights Agreement, dated as of June 23, 1999, between Craftmade
International, Inc. and Harris Trust and Savings Bank, as Rights Agent, previously
filed as an exhibit to Form 8-K dated July 9, 1999 (File No. 000-26667), and
incorporated by reference herein.10.1
    
    Assignment of Rents and Leases dated December 21, 1995, between Craftmade
International, Inc. and Allianz Life Insurance Company of North America (including
exhibits), previously filed as an exhibit in Form 10Q for the quarter ended December
31, 1995, and herein incorporated by reference.10.2
    
    Deed of Trust, Mortgage and Security Agreement made by Craftmade
International, Inc., dated December 21, 1995, to Patrick M. Arnold, as trustee for
the benefit of Allianz Life Insurance Company of North America (including exhibits),
previously filed as an exhibit in Form 10-Q for the quarter ended December 31, 1995,
and herein incorporated by reference.
 26




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##### Table of Contents



10.3
    
    Craftmade International, Inc. 1999 Stock Option Plan, filed as Exhibit A to
the Companys Proxy Statement on Schedule 14A filed October 4, 2000 (File No.
000-26667) and herein incorporated by reference.10.4
    
    Craftmade International, Inc. 2000 Non-Employee Director Stock Plan, filed
as Exhibit B to the Companys Proxy Statement on Schedule 14A filed October 4, 2000
(File No. 000-26667) and herein incorporated by reference.10.5
    
    Second Amended and Restated Loan Agreement with Frost dated September 18,
2006, previously filed as Exhibit 10.1 to Form 8-K dated September 18, 2006 (File No.
000-26667), and incorporated by reference herein.10.6
    
    Revolving Promissory Note (the Note) with dated September 18, 2006,
previously filed as Exhibit 10.2 to Form 8-K dated September 18, 2006 (File No.
000-26667), and incorporated by reference herein.31.1*
    
    Certification of James R. Ridings, Chief Executive Officer of the Company, pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of J. Marcus Scrudder, Chief Financial Officer of the
Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of James R. Ridings, Chairman of the Board, President and
Chief Executive Officer of the Company, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.2*
    
    Certification of J. Marcus Scrudder, Chief Financial Officer of the
Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Each document marked with an asterisk is filed or furnished herewith. 27