<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999 OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO ____________

Commission File Number
       1-10471

                          CRAFTMADE INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                             75-2057054
  (State or other jurisdiction                                (I.R.S. Employer
of Incorporation or Organization)                            Identification No.)


650 South Royal Lane, Suite 100 Coppell, Texas                     75019
  (Address of principal executive offices)                       Zip Code


Registrant's telephone number, including area code (972) 393-3800


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ].

6,726,361 shares of Common Stock were outstanding as of February 11, 2000.


<PAGE>   2


                 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES

                     Index to Quarterly Report on Form 10-Q



Part I.   Financial Information

          Item 1.   Financial Statements (unaudited)

                    Condensed Consolidated Statements of Income for the three
                    and six months ended December 31, 1999 and 1998.

                    Condensed Consolidated Balance Sheets as of December 31,
                    1999 and June 30, 1999.

                    Condensed Consolidated Statement of Changes in Stockholders'
                    Equity for the six months ended December 31, 1999.

                    Condensed Consolidated Statements of Cash Flows for the six
                    months ended December 31, 1999 and 1998.

                    Notes to Condensed Consolidated Financial Statements.

          Item 2.   Management's Discussion and Analysis of Financial Condition
                    and Results of Operations.

          Item 3.   Quantitative and Qualitative Disclosures About Market Risk



Part II.  Other Information

          Item 1.   Legal Proceedings
          Item 2.   Changes in Securities
          Item 3.   Defaults Upon Senior Securities
          Item 4.   Submission of Matters to a Vote of Security Holders
          Item 5.   Other Information
          Item 6.   Exhibits and Reports on Form 8-K


<PAGE>   3


                 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                   -------------------------------------------
                                   (Unaudited)


<TABLE>
<CAPTION>
                         FOR THE THREE MONTHS ENDED       FOR THE SIX MONTHS ENDED
                        ----------------------------    ----------------------------
                         December 31,   December 31,    December 31,    December 31,
                             1999           1998            1999            1998
                        ------------    ------------    ------------    ------------

<S>                     <C>             <C>             <C>             <C>
Net Sales               $     18,167    $     17,669    $     39,821    $     41,161
Cost of goods sold            11,858          11,103          25,407          26,119
                        ------------    ------------    ------------    ------------

  Gross profit                 6,309           6,566          14,414          15,042
                        ------------    ------------    ------------    ------------

Selling, general
 and administrative
 expenses                      4,108           3,878           8,873           7,872
Interest expense,net             368             320             706             728
Depreciation and
 amortization                    219             192             430             394
                        ------------    ------------    ------------    ------------

    Total expenses             4,695           4,390          10,009           8,994
                        ------------    ------------    ------------    ------------

Income before
 income taxes                  1,614           2,176           4,405           6,048
and minority interest

Provision for
 income taxes                    511             559           1,396           1,969
                        ------------    ------------    ------------    ------------

Income before
minority interest              1,103           1,617           3,009           4,079
 Minority interest              (195)           (358)           (539)           (624)
                        ------------    ------------    ------------    ------------

Net income              $        908    $      1,259    $      2,470    $      3,455
                        ============    ============    ============    ============


Basic and diluted
 earnings per share     $        .13    $        .17    $        .35    $        .46
                        ============    ============    ============    ============

Cash dividends
declared
per common share        $        .02    $        .02    $        .04    $        .04
                        ============    ============    ============    ============
</TABLE>


                       SEE ACCOMPANYING NOTES TO CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS


<PAGE>   4


                 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                     ASSETS


<TABLE>
<CAPTION>
                                 December 31,
                                     1999         June 30,
                                 (Unaudited)       1999
                                 ------------   ------------
                                       (In thousands)
<S>                              <C>            <C>
Current assets:
  Cash                           $      1,365   $      1,563
  Accounts receivable - trade,
    net of allowance                   12,632         14,586
  Inventory                            14,219         13,779
  Prepaid expenses and other
    current assets                      1,760          1,507
                                 ------------   ------------

   Total current assets                29,976         31,435
                                 ------------   ------------


Property and equipment, net             9,606          9,691
                                 ------------   ------------

Other assets:
  Goodwill, net                         5,341          5,543
  Other assets                             46             48
                                 ------------   ------------

         Total other assets             5,387          5,591
                                 ------------   ------------

                                 $     44,969   $     46,717
                                 ============   ============
</TABLE>


                       SEE ACCOMPANYING NOTES TO CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS


<PAGE>   5
                 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                         December 31,
                                             1999
                                         ------------       June 30,
                                          (Unaudited)        1999
                                         ------------    ------------
<S>                                      <C>             <C>
Current liabilities:                           (In thousands)
  Note payable, facility-
    current portion                      $        821    $        788
  Revolving line of credit                     14,700          11,950
  Accounts payable - trade and
    commissions                                 3,844           4,518
  Income taxes payable                             43             446
  Other accrued liabilities                       318             426
                                         ------------    ------------

         Total current liabilities             19,726          18,128
                                         ------------    ------------

  Note payable, facility -
    long term portion                           4,258           4,677
  Other liabilities                                83              83
  Minority interest                               453             466
                                         ------------    ------------

  Total liabilities                            24,520          23,354
                                         ------------    ------------

Stockholders' equity:
 Series A cumulative, convertible,
   callable preferred stock, $1.00
   par value, 2,000,000 shares
   authorized; 32,000 shares issued                32              32
 Common stock, $.01 par value,
   15,000,000 shares authorized,
   9,316,535 shares issued                         93              93
Additional paid-in capital                     12,453          12,453
Retained earnings                              21,233          19,046
                                         ------------    ------------
                                               33,811          31,624
 Less:  treasury stock, 2,461,477
   and 1,917,677 common shares at
   cost as of December 31, 1999 and
   June 30, 1999, respectively
   and 32,000 preferred shares
        at cost                               (13,362)         (8,261)
                                         ------------    ------------
            Total stockholders' equity         20,449          23,363
                                         ------------    ------------

                                         $     44,969    $     46,717
                                         ============    ============
</TABLE>

                       SEE ACCOMPANYING NOTES TO CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>   6
                 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                   FOR THE SIX MONTHS ENDED DECEMBER 31, 1999


<TABLE>
<CAPTION>
(In $thousands)                                             Series A     ADDITIONAL
                                                            Preferred      PAID-IN     RETAINED
                                       VOTING COMMON STOCK    Stock        CAPITAL     EARNINGS         TREASURY STOCK
                                      --------------------- ----------   -----------  ----------      -------------------

                                      Shares     Amount                                               Shares    Amount      Total
                                      ------   ----------                                             ------   --------    --------
<S>                                   <C>      <C>          <C>          <C>          <C>              <C>     <C>         <C>
Balance as of June 30, 1999             9317   $       93   $       32   $   12,453   $   19,046       1,950   $ (8,261)   $ 23,363

Stock repurchase                                                                                         543     (5,101)     (5,101)

Net Income for the six months
   ended December 31, 1999                                                                 2,470                              2,470

Cash Dividends                                                                              (283)                              (283)

Balance as of December 31, 1999         9317   $       93   $       32   $   12,453   $   21,233        2493   $(13,362)   $ 20,449
</TABLE>


<PAGE>   7


                 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 -----------------------------------------------
                                   (Unaudited)

<TABLE>
<CAPTION>
                                               FOR THE SIX MONTHS ENDED
                                              --------------------------
                                              December 31,  December 31,
                                                  1999          1998
                                               ----------    ----------
                                                    (In Thousands)
<S>                                            <C>           <C>
Net cash provided by
  operating activities                         $    3,517    $    5,713
                                               ----------    ----------


Cash flows from investing activities:
  TSI acquisition                                      --        (2,041)
  Net additions to equipment                         (143)         (225)
                                               ----------    ----------

  Net cash used for investing activities             (143)       (2,266)
                                               ----------    ----------

Cash flows from financing activities:
  Principal payments for note payable                (386)         (333)
  Stock repurchase                                 (5,101)           --
  Net proceeds from revolving line of credit        2,750           778
  Cash dividends                                     (283)         (251)
  Distributions to minority interest
    shareholders in subsidiary                       (552)         (451)
                                               ----------    ----------
Net cash used for financing activities
                                                   (3,572)         (257)
                                               ----------    ----------

 Net (decrease) increase in cash                     (198)        3,190

Cash at beginning of period                         1,563           925
                                               ----------    ----------

 Cash at end of period                         $    1,365    $    4,115
                                               ==========    ==========
</TABLE>


Supplemental disclosures of cash flow information:

<TABLE>
<CAPTION>
                                               FOR THE SIX MONTHS ENDED
                                              --------------------------
                                              December 31,  December 31,
                                                  1999          1998
                                               ----------    ----------
                                                    (In Thousands)
<S>                                            <C>           <C>
Cash paid during the period for:
  Interest                                     $      706    $      728
                                               ==========    ==========

  Income taxes                                 $    1,800    $    2,050
                                               ==========    ==========
</TABLE>

                       SEE ACCOMPANYING NOTES TO CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS


<PAGE>   8


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                        OF CRAFTMADE INTERNATIONAL, INC.
                                AND SUBSIDIARIES

                                DECEMBER 31, 1999
                                   (Unaudited)


Note 1 - BASIS OF PREPARATION AND PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission and include all adjustments which are, in the opinion of management,
necessary for a fair presentation. The condensed consolidated financial
statements include the accounts of the Company and its subsidiaries. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The Company
believes that the disclosures are adequate to make the information presented not
misleading; however, it is suggested that these financial statements be read in
conjunction with the financial statements and the notes thereto which are
included in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1999. The financial data for the interim periods may not necessarily be
indicative of results to be expected for the year.

Certain amounts for the three and six months ended December 31, 1998 have been
reclassified to conform with the current quarter and six months' presentation.


Note 2 - TREASURY STOCK PURCHASES

On March 17, 1999, the Company's Board of Directors authorized the Company's
management to repurchase up to 200,000 shares of the Company's outstanding
stock. During the first quarter of fiscal 2000 the Company repurchased the
remaining 22,500 shares at an aggregate cost of $208,000 under this plan.

On August 13, 1999, and on October 29, 1999, the Company's Board of Directors
authorized the Company's management to repurchase an additional 400,000 and
250,000 shares, respectively, of the Company's outstanding common stock. At
December 31, 1999, the Company had repurchased 521,300 shares at an aggregate
cost of $4,893,000 related to this plan.


<PAGE>   9


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                        OF CRAFTMADE INTERNATIONAL, INC.
                                AND SUBSIDIARIES

                                DECEMBER 31, 1999
                                   (Unaudited)
                                 (In Thousands)


Note 3 - EARNINGS PER SHARE

The following is a reconciliation of the numerator and denominator used in the
basic and diluted EPS calculations:


<TABLE>
<CAPTION>
               FOR THE THREE MONTHS ENDED  FOR THE SIX MONTHS ENDED
               --------------------------  ------------------------
               December 31,  December 31,  December 31, December 31,
                   1999         1998          1999         1998
                ----------   ----------    ----------   ----------
<S>             <C>          <C>           <C>          <C>
Basic and
Diluted EPS

Numerator:
Net Income      $      908   $    1,259    $    2,470   $    3,455
                ----------   ----------    ----------   ----------

Denominator:
Common Shares
Outstanding          6,937        7,555         7,094        7,550
                ----------   ----------    ----------   ----------

Basic EPS       $      .13   $      .17    $      .35   $      .46
                ==========   ==========    ==========   ==========

Denominator:
Common
Shares
Outstanding          6,937        7,555         7,094        7,550
Options                  0           16             0           16
                ----------   ----------    ----------   ----------
Total Shares         6,937        7,571         7,094        7,566
                ==========   ==========    ==========   ==========

Diluted EPS     $      .13   $      .17    $      .35   $      .46
                ==========   ==========    ==========   ==========
</TABLE>


<PAGE>   10


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                        OF CRAFTMADE INTERNATIONAL, INC.
                                AND SUBSIDIARIES

                                DECEMBER 31, 1999
                                   (Unaudited)


Note 4 - DERIVATIVE FINANCIAL INSTRUMENTS

During the first quarter of fiscal 2000, the Company entered into an interest
rate swap agreement, with a maturity of December 26, 2003, to manage its
exposure to interest rate movements by effectively converting its long-term
facility debt from fixed to variable rates. The notional amount of the interest
rate swap subject to variable rates as of December 31, 1999 was $5,079,000,
which decreases as payments are made on the long-term debt. Under this
agreement, the Company has contracted to pay a variable rate equal to LIBOR plus
2.43% (8.25% at December 31, 1999) and receive a fixed rate of 8.125%. This
agreement is accounted for as a hedge of fixed rate debt and interest rate
differentials paid or received under this agreement will be recognized as
adjustments to interest expense. Gains or losses on terminated swaps will be
recognized over the remaining life of the underlying obligation as an adjustment
to interest expense. The fair value of the swap agreement approximated ($86,306)
at December 31, 1999. This amount approximates the present value of the
difference between estimated future variable-rate payments and fixed-rate
receipts. This amount has not been recognized in the Condensed Consolidated
Financial Statements, since it is accounted for as a hedge and the Company has
no present intention of terminating the swap prior to the maturity date of the
debt.


Note 5 - SEGMENT INFORMATION

The Company has two operating segments: Craftmade and Trade Source International
("TSI"). The Craftmade segment primarily derives its revenue from home
furnishings including ceiling fans, light kits, bathstrip lighting and lamps
offered primarily through lighting showrooms. The TSI segment derives its
revenue from outdoor lighting and fan accessories marketed solely to mass
merchandisers.

The accounting policies of the segments are the same as those described in Note
2 - Summary of Significant Accounting Policies to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1999. The Company evaluates the
performance of its segments and allocates resources to them based on their
operating profit and loss and cash flows.


<PAGE>   11


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                        OF CRAFTMADE INTERNATIONAL, INC.
                                AND SUBSIDIARIES

                                DECEMBER 31, 1999
                                   (Unaudited)


Note 5 - SEGMENT INFORMATION (con't)

The following table presents information about the reportable segments (in
thousands):


<TABLE>
<CAPTION>
                                                Craftmade      TSI      Total
                                                ----------   -------   -------
<S>                                             <C>          <C>       <C>
For the three months ended December 31, 1999:
Net sales from external customers               $   11,145   $ 7,022   $18,167
Operating profit                                     1,724       258     1,982

For the three months ended December 31, 1998:
Net sales from external customers               $   10,992   $ 6,677   $17,669
Operating profit                                     1,959       537     2,496


For the six months ended December 31, 1999:
Net sales from external customers               $   24,448   $15,372   $39,821
Operating profit                                     4,072     1,039     5,111


For the six months ended December 31, 1998:
Net sales from external customers               $   23,211   $17,950   $41,161
Operating profit                                     4,517     2,259     6,776
</TABLE>


<PAGE>   12


ITEM 2         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
               RESULTS OF OPERATIONS.

Cautionary Statement

With the exception of historical information, the matters discussed under
"Results of Operations" and "Liquidity and Capital Resources" contain
forward-looking statements. There are certain important factors which could
cause results to differ materially than those anticipated by some of the
forward-looking statements. Some of these important factors include, among other
things, changes from anticipated levels of sales, whether due to future national
or regional economic and competitive conditions, changes in relationships with
customers, TSI's dependence on select mass merchandisers, customer acceptance of
existing and new products, pricing pressures due to excess capacity, raw
material cost increases, changes in tax or interest rates, unfavorable economic
and political developments in Asia, the location of the Company's primary
vendors, declining conditions in the home construction industry,resolution of
the Year 2000 issue, inability to realize deferred tax assets, and other
uncertainties, all of which are difficult to predict and many of which are
beyond the control the Company.

Results of Operations

Three Months Ended December 31, 1999 Compared to Three Months Ended December 31,
1998

Net Sales. Net sales increased $498,000 to $18,167,000 for the three month
period ended December 31, 1999 from $17,669,000 for the same three month period
last year. Craftmade and TSI represented $153,000 and $345,000, respectively, of
this increase. Craftmade's sales benefited from an increase in fan sales of 9.2%
or $537,000 for the three month period ended December 31, 1999 compared to the
same period in the previous year. Fan sales continued to be strong through the
success of Craftmade's marketing strategy which includes innovative product
design, competitive pricing and selective expansion of its distribution base.
The increase in fan sales was partially offset by a $384,000 decline in sales of
products other than fans, primarily related to the Company's liquidation sale of
$152,000 in lamp inventory during the second quarter of fiscal 1999. Similar
liquidations did not occur during the second quarter of fiscal 2000.

Gross Profit. Gross profit for the three months ended December 31, 1999
decreased to $6,309,000 or 34.7% of net sales from $6,566,000 or 37.2% of net
sales for the same period of 1998. Gross profit from TSI decreased $357,000 to
20.9% of net sales for the three months ended December 31, 1999 from 27.3% for
the same period of the previous year. Craftmade's gross profit increased $98,000
and gross margins improved to 43.5% of sales from 43.2% for the three months
ended December 31, 1999 and 1998, respectively. The decline in the gross margin
of TSI was due to an increase in direct shipment sales which carry lower
margins than domestic shipments as well as additional rebates provided to a
major home center customer to assist the customer in clearing certain categories
of slow-moving inventory.

<PAGE>   13


Selling, General and Administrative Expenses. Total selling, general and
administrative ("SG&A") expenses increased $230,000 to $4,108,000 or 22.6% of
net sales, for the three months ended December 31, 1999 compared to $3,878,000
or 21.9% of sales for the same period in the previous year. Total SG&A expense
of Craftmade increased $321,000 to 27.1% of sales compared to 24.6% for the same
period in the previous year. The increase in SG&A expenses of Craftmade as a
percentage of sales was primarily due to the decline in lamp sales during the
fiscal year 2000 period, which resulted in the de-leveraging of SG&A expenses
compared to the same period in the previous year when lamp inventory was being
aggressively liquidated. For the three-month period ended December 31st 1999
TSI's SG&A expense declined to $1,086,000 or 15.5% of sales compared to
$1,177,000 or 17.6% of sales for the year-ago period. The decline was due to
management's efforts to reduce costs and eliminate redundancies in SG&A
subsequent to the acquisition of TSI.

Interest Expense. Net interest expense increased $48,000 to $368,000 for the
three months ended December 31, 1999 from $320,000 for the same three month
period last year. This increase was primarily the result of a net increase in
the Company's line of credit during the six months ended December 31, 1999. The
proceeds were utilized to repurchase the Company's common stock during the
period.

Minority Interest. Minority interest of $195,000 and $358,000 for the three
months ended December 31, 1999 and 1998, respectively, represented the 50%
ownership of Prime Home Impressions, LLC ("PHI") by a non-Company owned member.
The non-company owned interest has been accounted for as a minority interest.
TSI is able to exert control over the operations of PHI by virtue of designating
a majority of the managers of PHI.

Six Months Ended December 31, 1999 Compared to Six Months Ended December 31,
1998

Net Sales. For the six months ended December 31, 1999, net sales decreased
$1,340,000 to $39,821,000 from $41,161,000 for the same six-month period last
year. This decrease was primarily represented by TSI's $2,578,000 decline in
sales for the six months ended December 31, 1999 offset partially by a
$1,237,000 increase in Craftmade's sales for the period. Net sales of TSI
declined as one of TSI's major customers reduced its level of purchasing during
the first quarter of fiscal 2000 while it continued to sell through previously
purchased inventory. The Company's management anticipates that this customer's
purchasing will strengthen as new products are introduced in the second half of
fiscal 2000. Craftmade's sales benefited from increased fan sales during the
period, partially offset by declining lamp sales, consistent with results for
the three-month period ended December 31, 1999.

Gross Profit. For the six month period ended December 31, 1999, gross profit
decreased to 36.2% of sales or $14,414,000 in 1999 from 36.5% of sales or
$15,042,000 in 1998. Gross profit from TSI declined to 24.0% of sales compared
to 27.9% for the same period in the previous year. Craftmade's gross margins
improved to 43.8% from 43.2% for the six months ended December 31, 1999 and
1998, respectively. The decline in the gross margin of TSI was due to an
increase in direct shipment sales, which carry lower margins than domestic
shipments, as well as additional rebates provided to a major home center
customer to assist the customer in clearing certain categories of slow-moving
inventory.


<PAGE>   14


Selling, General and Administrative Expenses. For the six month period ended
December 31, 1999, total selling, general and administrative expense increased
to $8,873,000 or 22.3% of sales compared to $7,872,000 or 19.1% of sales for the
same period last year. SG&A expenses of Craftmade increased to $6,453,000 or
26.4% of sales compared to $5,349,000 or 23.0% of sales for the same period last
year. The increase in SG&A expenses of Craftmade as a percentage of sales was
primarily due to the decline in lamp sales during the fiscal year 2000 period,
which resulted in the de-leveraging of SG&A expenses compared to the same period
in the previous year when lamp inventory was being aggressively liquidated. For
the six month period ending December 31, 1999, SG&A expenses of TSI increased as
a percentage of sales to 15.7% of sales compared to 14.1% for the same period in
the previous year, primarily as a result of the decline in revenues the division
experienced in the first quarter of fiscal 2000. The Company's management
anticipates that in the second half of the fiscal year new product introductions
will increase sales of both Craftmade and TSI, and thus selling, general and
administrative expenses as a percentage of sales will be lower than the current
level.

Interest Expense. For the six-month period ended December 31, 1999, net interest
expense decreased to $706,000 compared to $728,000 for the same period in the
previous year. This decrease was primarily the result of a more favorable
borrowing rate in effect during the period, and lower interest on the facility
note which was reduced by prepayments.

Minority Interest. Minority interest of $539,000 and $623,000 for the six months
ended December 31, 1999 and 1998, respectively, represented the 50% ownership of
Prime Home Impressions, LLC by a non-Company owned member. The non-company owned
interest has been accounted for as a minority interest. TSI is able to exert
control over the operations of PHI by virtue of designating a majority of the
managers of PHI.

PROVISION FOR INCOME TAXES

The provision for income taxes decreased to $1,396,000 or 36.1% of net income
before taxes but after minority interest, for the six months ended December 31,
1999 from $1,969,000 or 36.3% for the same period of the prior year.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash decreased $198,000 from $1,563,000 at June 30, 1999 to
$1,365,000 at December 31, 1999. The Company's operating activities provided
cash of $3,517,000, primarily attributable to the Company's net income from
operations and collections on customer accounts.

The $143,000 of cash used for investing activities related to the purchase of
general warehouse, office and computer equipment.


<PAGE>   15


The $3,572,000 of cash used for financing activities was primarily the result of
(i) the repurchase of 543,800 shares of the Company's common stock pursuant to
the Company's stock repurchase plans, at an aggregate cost of $5,101,000, (ii)
distributions to PHI's minority interest shareholder of $552,000, (iii)
principal payments of $386,000 on the Company's notes payable, and (iv) cash
dividends of $283,000. These amounts were partially offset by the net advance of
$2,750,000 under the Company's lines of credit. It is management's intention to
repurchase the Company's common stock from time to time under Board approved
plans as long as the Company's common stock continues to present an attractive
investment for the Company.

At December 31, 1999, subject to continued compliance with certain covenants and
restrictions, the Company had $16,000,000 available on its line of credit of
which $13,000,000 had been utilized. In addition, PHI had $3,000,000 available
on its line of credit, of which $1,700,000 had been utilized. The Company's
management believes that its current lines of credit, combined with cash flows
from operations, are adequate to fund the Company's current operating needs,
make annual payments approximating $1,400,000 under the facility note payable,
fund anticipated capital expenditures, fund possible future stock repurchase
plans, as well as fund its projected growth over the next twelve months.

At December 31, 1999, $5,079,000 remained outstanding under the twelve year note
payable for the Company's 378,000 square foot operating facility. The Company's
management believes that this facility will be sufficient for its purposes for
the foreseeable future.

During the first quarter of fiscal 2000, the Company entered into a letter
agreement with Chase Bank of Texas, N.A., pursuant to which the Company
conducted a fixed-to-floating interest rate swap. See Note 4 - Derivative
Financial Instruments in the Notes to Condensed Consolidated Financial
Statements and Item 3 - Quantitative and Qualitative Disclosures about Market
Risk. The Company does not believe that this transaction will have a material
effect on its financial condition.

YEAR 2000 ISSUE

The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year potentially causing
date-sensitive software to misinterpret the date.

<PAGE>   16


The Company's analysis of the Year 2000 Issue encompasses four phases:
assessment, renovation, testing and implementation. The Company has assessed all
systems that could potentially be affected by the Year 2000 Issue, including
facility systems, telephone hardware and software, out-sourced services,
suppliers and customers. The Company has upgraded, as needed, and tested all
systems for Year 2000 compliance, at a cost of $12,000. As of the date hereof,
the Company has not experienced any material problems relating to the Year 2000
Issue.

ITEM 3         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The information set forth below constitutes a "forward looking statement." See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Cautionary Statement."

As a result of the terms of the Company's note payable on its operating
facility, the Company is subject to market risk associated with adverse changes
in interest rates. In an effort to reduce this market risk, the Company entered
into an interest rate swap agreement (the "Swap Agreement") with Chase Bank of
Texas, National Association ("Chase") during the first quarter of fiscal 2000.
The Swap Agreement is held by the Company for non-trading


<PAGE>   17


purposes and is accounted for by the Company as a hedging instrument, with any
realized gains or losses recorded as adjustments to interest expense.

The Swap Agreement is based on a notional principle amount of indebtedness equal
to the balance of the facility note payable(the "Notional Amount"), which
totaled $5,079,000 on December 31, 1999. During the term of the Swap Agreement,
the Company receives a fixed rate of interest (8.125%) from Chase on such
Notional Amount in consideration of its obligation to pay a floating rate of
interest on such Notional Amount. The floating rate of interest is based on the
regularly published London Interbank Offered Rate ("LIBOR"). The Swap Agreement
matures on December 26, 2003.

Although the Company entered into the Swap Agreement to reduce its exposure to
changes in interest rates, a sharp rise in interest rates could materially
adversely affect the financial condition and results of operations of the
Company. Under the Swap Agreement, for each one percent (1%) incremental
increase in LIBOR, the Company's annualized interest expense would increase by
approximately $50,790. Consequently, an increase in LIBOR of five percent (5%)
would result in an estimated annualized increase of interest expense for the
Company of approximately $253,950.


<PAGE>   18


                                     PART II

                                OTHER INFORMATION


Item 1.        Legal Proceedings

               not applicable

Item 2.        Changes in Securities

               not applicable

Item 3.        Defaults Upon Senior Securities

               not applicable

Item 4.        Submission of Matters to a Vote of Security Holders

                    At the annual meeting of the Company's stockholders on
               October 29, 1999, the stockholders of the Company (i) elected
               James R. Ridings, Clifford Crimmings, Kenneth M. Cancienne, A.
               Paul Knuckley, Jerry E. Kimmel, Neall W. Humphrey, John DeBlois
               and Lary C. Snodgrass as directors of the Company; and (ii)
               ratified the appointment of Pricewaterhouse Coopers LLP as
               independent auditors.

                    The vote in the election of directors was as follows:

<TABLE>
<CAPTION>
                          For:       Withheld:
                       ---------      ------
<S>                    <C>            <C>
James R. Ridings       5,903,967      41,780
Clifford Crimmings     5,903,967      41,780
Kenneth M. Cancienne   5,899,875      45,872
A. Paul Knuckley       5,903,967      41,780
Jerry E. Kimmel        5,903,467      42,280
Neall W. Humphrey      5,902,700      43,047
John DeBlois           5,902,700      43,047
Lary C. Snodgrass      5,903,967      41,780
</TABLE>


                    The vote in the ratification of Pricewaterhouse Coopers LLP
               as independent auditors for the fiscal year ending June 30, 2000
               was 5,921,151 for, 13,870 against, and 10,725 abstaining.


<PAGE>   19


Item 5.        Other Information


                    Resignation of Director. Effective October 25, 1999, Mr.
               Kenneth M. Cancienne resigned his position as member of the
               Company's Board of Directors.

                    Appointment of Chief Financial Officer and Director. On
               October 25, 1999, Ms. Kathleen B. Oher was named as the Company's
               Chief Financial Officer and was appointed to the Company's Board
               of Directors.

Item 6.        Exhibits and Reports of Form 8-K

               a).  Exhibits

               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 therein.

               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 therein.

               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-18 (File No. 33-33594-FW) and incorporated by
                    reference therein.

               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 therein.

               10.1 Earnest Money contract and Design/Build Agreement dated May
                    8, 1995, between MEPC Quorum Properties II, Inc. and
                    Craftmade International, Inc. (including exhibits),
                    previously filed as an exhibit in Form 10-Q for the quarter
                    ended December 31, 1995, and herein incorporated by
                    reference.

               10.2 Assignment of Rents and Leases dated December 21, 1995,
                    between Craftmade International, Inc. and Allianz Life
                    Insurance Company of North America (including exhibits),


<PAGE>   20


                    previously filed as an exhibit in Form 10-Q for the quarter
                    ended December 31, 1995, and herein incorporated by
                    reference.

               10.3 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.

               10.4 Second Amended and Restated Credit Agreement dated November
                    14, 1995, among Craftmade International, Inc., Nations Bank
                    of Texas, N.A., as Agent and the Lenders defined therein
                    (including exhibits), previously filed as an exhibit in Form
                    10-Q for the quarter ended December 31, 1995, and herein
                    incorporated by reference.

               10.5 Lease Agreement dated November 30, 1995, between Craftmade
                    International, Inc. and TSI Prime, Inc., previously filed as
                    an exhibit in Form 10-Q for the quarter ended December 31,
                    1995, and herein incorporated by reference.

               10.6 Revolving credit facility with Texas Commerce Bank,
                    previously filed as an exhibit in Form 10-K for the year
                    ended June 30, 1996, and herein incorporated by reference.

               10.7 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 herein
                    incorporated by reference.

               10.8 Voting Agreement, dated July 1, 1998, by and among James R.
                    Ridings, Neall Humphrey and John DeBlois, filed as Exhibit
                    2.1 to the Company's Current Report on Form 8-K filed


<PAGE>   21


                    July 15, 1998 (File No. 33-33594-FW) and herein incorporated
                    by reference.

              10.9  Third Amendment to Credit Agreement, dated July 1, 1998, by
                    and among Craftmade International, Inc., a Delaware
                    corporation, Trade Source International, Inc., a Delaware
                    corporation, Chase Bank of Texas, National Association
                    (formerly named Texas Commerce Bank, National Association)
                    and Frost National Bank (formerly named Overton Bank and
                    Trust), 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
                    herein incorporated by reference.

              10.10 Consent to Merger by Chase Bank of Texas, National
                    Association and Frost National Bank, 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 herein incorporated by reference.

              10.11 Employment Agreement, dated July 1, 1998, by and among
                    Craftmade International, Inc., Trade Source International,
                    Inc., a Delaware corporation, and Neall Humphrey, 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 herein
                    incorporated by reference.

              10.12 Employment Agreement, dated July 1, 1998, by and among
                    Craftmade International, Inc., Trade Source International,
                    Inc., a Delaware corporation, and Leslie Humphrey, 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 herein
                    incorporated by reference.

              10.13 Employment Agreement, dated July 1, 1998, by and among
                    Craftmade International, Inc., Trade Source International,
                    Inc., a Delaware corporation, and John DeBlois, 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 herein
                    incorporated by reference.

              10.14 Registration Rights Agreement, dated July 1, 1998, by and
                    among Craftmade International,


<PAGE>   22


                    Inc., Neall and Leslie Humphrey and John DeBlois, 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 herein
                    incorporated by reference.

              10.15 ISDA Master Agreement and Schedule, dated June 17, 1999,
                    by and among Chase Bank of Texas, National Association,
                    Craftmade International, Inc., Durocraft International, Inc.
                    and Trade Source International, Inc., filed as Exhibit 10.15
                    to the Company's Quarterly Report on Form 10-Q filed
                    November 12, 1999 (file No. 000-26667) and herein
                    incorporated by reference

              10.16 Confirmation under ISDA Master Agreement, dated July 23,
                    1999, from Chase Bank of Texas, National Association to
                    Craftmade International, Inc., filed as Exhibit 10.16
                    to the Company's Quarterly Report on Form 10-Q filed
                    November 12, 1999 (file No. 000-26667) and herein
                    incorporated by reference

              27.1  Financial Data Schedule.

          b). Reports on Form 8-K

              None.


<PAGE>   23


                                    SIGNATURE

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

                                     CRAFTMADE INTERNATIONAL, INC.
                                     -------------------------------------------
                                                  (Registrant)



Date     February 11, 2000                   /s/  James R. Ridings
    --------------------------               -----------------------------------
                                               JAMES R. RIDINGS
                                              President and Chief
                                               Executive Officer


Date     February 11, 2000                   /s/  Kathleen B. Oher
    -----------------------                  -----------------------------------
                                               KATHLEEN B. OHER
                                              Chief Financial Officer


<PAGE>   24


                                Index to Exhibits

<TABLE>
<CAPTION>
Exhibit
Number                              Description
------                              -----------

<S>       <C>
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 therein.

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
          therein.

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-18 (File No.
          33-33594-FW) and incorporated by reference therein.

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 therein.

10.1      Earnest Money contract and Design/Build Agreement dated May 8, 1995,
          between MEPC Quorum Properties II, Inc. and Craftmade International,
          Inc. (including exhibits), previously filed as an exhibit in Form 10-Q
          for the quarter ended December 31, 1995, and herein incorporated by
          reference.

10.2      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 10-Q for the quarter ended December 31, 1995, and herein
          incorporated by reference.

10.3      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.

10.4      Second Amended and Restated Credit Agreement dated November 14, 1995,
          among Craftmade International, Inc., Nations Bank of Texas, N.A., as
          Agent and the Lenders defined therein (including exhibits), previously
          filed as an exhibit in Form 10-Q for the quarter ended December 31,
          1995, and herein incorporated by reference.
</TABLE>


<PAGE>   25


<TABLE>
<S>       <C>
10.5      Lease Agreement dated November 30, 1995, between Craftmade
          International, Inc. and TSI Prime, Inc., previously filed as an
          exhibit in Form 10-Q for the quarter ended December 31, 1995, and
          herein incorporated by reference.

10.6      Revolving credit facility with Texas Commerce Bank, previously filed
          as an exhibit in Form 10-K for the year ended June 30, 1996, and
          herein incorporated by reference.

10.7      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 herein
          incorporated by reference.

10.8      Voting Agreement, dated July 1, 1998, by and among James R. Ridings,
          Neall Humphrey and John DeBlois, 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 herein incorporated by reference.

10.9      Third Amendment to Credit Agreement, dated July 1, 1998, by and among
          Craftmade International, Inc., a Delaware corporation, Trade Source
          International, Inc., a Delaware corporation, Chase Bank of Texas,
          National Association (formerly named Texas Commerce Bank, National
          Association) and Frost National Bank (formerly named Overton Bank and
          Trust), 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 herein incorporated
          by reference.

10.10     Consent to Merger by Chase Bank of Texas, National Association and
          Frost National Bank, 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
          herein incorporated by reference.

10.11     Employment Agreement, dated July 1, 1998, by and among Craftmade
          International, Inc., Trade Source International, Inc., a Delaware
          corporation, and Neall Humphrey, 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 herein incorporated by reference.

</TABLE>


<PAGE>   26



<TABLE>
<S>       <C>
10.12     Employment Agreement, dated July 1, 1998, by and among Craftmade
          International, Inc., Trade Source International, Inc., a Delaware
          corporation, and Leslie Humphrey, 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 herein incorporated by reference.

10.13     Employment Agreement, dated July 1, 1998, by and among Craftmade
          International, Inc., Trade Source International, Inc., a Delaware
          corporation, and John DeBlois, 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 herein incorporated by reference.

10.14     Registration Rights Agreement, dated July 1, 1998, by and among
          Craftmade International, Inc., Neall and Leslie Humphrey and John
          DeBlois, 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 herein incorporated
          by reference.

10.15     ISDA Master Agreement and Schedule, dated June 17, 1999, by and among
          Chase Bank of Texas, National Association, Craftmade International,
          Inc., Durocraft International, Inc. and Trade Source International,
          Inc., filed as Exhibit 10.15 to the Company's Quarterly Report on Form
          10-Q filed November 12, 1999 (file No. 000-26667) and herein
          incorporated by reference

10.16     Confirmation under ISDA Master Agreement, dated July 23, 1999, from
          Chase Bank of Texas, National Association to Craftmade International,
          Inc., filed as Exhibit 10.16 to the Company's Quarterly Report on Form
          10-Q filed November 12, 1999 (file No. 000-26667) and herein
          incorporated by reference

27.1      Financial Data Schedule.
</TABLE>