<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 SEPTEMBER 30, 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   .
    ---         ---

6,976,361 shares of Common Stock were outstanding as of November 12, 1999.
<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
                  months ended September 30, 1999 and 1998.

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

                  Condensed Consolidated Statement of Changes in Stockholders'
                  Equity for the three months ended September 30, 1999.

                  Condensed Consolidated Statements of Cash Flows for the three
                  months ended September 30, 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
                                                     -----------------------------
                                                     September 30,   September 30,
                                                         1999            1998
                                                     -------------   -------------
                                                  (In thousands except per share data)
<S>                                               <C>                <C>
Net Sales                                              $ 21,654        $ 23,492
Cost of goods sold                                       13,549          15,016
                                                       --------        --------

Gross profit                                              8,105           8,476
                                                       --------        --------
Selling, general and
  administrative expenses                                 4,765           3,994
Interest expense, net                                       338             408
Depreciation and amortization                               211             202
                                                       --------        --------

     Total Expenses                                       5,314           4,604
                                                       --------        --------

Income before income taxes
  and minority interest                                   2,791           3,872

Provision for income taxes                                  885           1,410
                                                       --------        --------

Income before minority interest                           1,906           2,462

Minority interest                                          (344)           (266)
                                                       --------        --------

Net income                                             $  1,562        $  2,196
                                                       ========        ========

Basic and diluted
  earnings per common share                            $    .22        $    .29
                                                       ========        ========


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


                       SEE ACCOMPANYING NOTES TO CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS


<PAGE>   4
                 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                     ASSETS


<TABLE>
<CAPTION>
                                                      September 30,
                                                          1999           June 30,
                                                       (Unaudited)        1999
                                                      -------------      --------
                                                             (In thousands)
<S>                                                   <C>                <C>
Current assets:
  Cash                                                   $ 1,706         $ 1,563
  Accounts receivable - trade,
    net of allowance                                      12,221          14,586
  Inventory                                               14,367          13,779
  Prepaid expenses and other
    current assets                                         1,704           1,507
                                                         -------         -------

   Total current assets                                   29,998          31,435
                                                         -------         -------


Property and equipment, net                                9,616           9,691
                                                         -------         -------

Other assets:
  Goodwill, net                                            5,447           5,543
  Other assets                                                41              48
                                                         -------         -------

         Total other assets                                5,488           5,591
                                                         -------         -------

                                                         $45,102         $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>
                                                     September 30,
                                                         1999          June 30,
                                                      (Unaudited)        1999
                                                     -------------     --------
                                                            (In thousands)
<S>                                                  <C>               <C>
Current liabilities:
  Note payable, facility-
    current portion                                    $    805        $    788
  Revolving line of credit                               14,950          11,950
  Accounts payable - trade and
    commissions                                           2,180           4,518
  Income taxes payable                                    1,131             446
  Other accrued liabilities                                 413             426
                                                       --------        --------

         Total current liabilities                       19,479          18,128
                                                       --------        --------

  Note payable, facility -
    long term portion                                     4,470           4,677
  Other liabilities                                          83              83
  Minority interest                                         353             466
                                                       --------        --------

  Total liabilities                                      24,385          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                                        20,469          19,046
                                                       --------        --------
                                                         33,047          31,624
 Less: treasury stock, 2,340,177
   and 1,917,677 common shares at
   cost as of September 30, 1999 and
   June 30, 1999, respectively
   and 32,000 preferred shares
   at cost                                              (12,330)         (8,261)
                                                       --------        --------
         Total stockholders' equity                      20,717          23,363
                                                       --------        --------

                                                       $ 45,102        $ 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 THREE MONTHS ENDED SEPTEMBER 30, 1999


<TABLE>
<CAPTION>
                                    VOTING COMMON STOCK    SERIES A   ADDITIONAL                 TREASURY STOCK
                                    -------------------    PREFERRED   PAID-IN     RETAINED     -----------------
                                     SHARES     AMOUNT      STOCK      CAPITAL     EARNINGS     SHARES    AMOUNT      TOTAL
                                    -------    --------    ---------  ----------   --------     ------   --------    --------
<S>                                 <C>        <C>         <C>        <C>          <C>          <C>      <C>         <C>
(In thousands)

Balance as of June 30, 1999           9,317    $     93    $     32    $ 12,453   $ 19,046      1,950   $ (8,261)   $ 23,363

Stock Repurchase                                                                                  422     (4,069)     (4,069)

Net Income for the three months
  ended September 30, 1999                                                           1,562                             1,562

Cash Dividends                                                                        (139)                             (139)
                                      -----    --------    --------    --------   --------      -----   --------    --------

Balance as of September 30, 1999      9,317    $     93    $     32    $ 12,453   $ 20,469      2,372   $(12,330)   $ 20,717
                                      =====    ========    ========    ========   ========      =====   ========    ========
</TABLE>


                       SEE ACCOMPANYING NOTES TO CONDENSED
                       CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>   7

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

<TABLE>
<CAPTION>
                                                     FOR THE THREE MONTHS ENDED
                                                    ------------------------------
                                                    September 30,    September 30,
                                                       1999              1998
                                                    ------------     -------------
                                                             (In thousands)
<S>                                                 <C>              <C>
Net cash provided by operating
activities:                                           $ 2,040           $ 3,225
                                                      -------           -------

Cash flows from investing activities:
  TSI acquisition                                          --            (2,041)
  Net additions to equipment                              (39)              (36)
                                                      -------           -------
Net cash used for investing activities                    (39)           (2,077)
                                                      -------           -------

Cash flows from financing activities:
  Net proceeds from
    Revolving lines of credit                           3,000             1,729
    Principal payments for note payable                  (193)             (156)
    Treasury stock purchases                           (4,069)               --
    Cash dividends                                       (139)             (100)
    Distributions to minority interest                   (457)             (341)
                                                      -------           -------
Net cash provided by (used for)
  financing activities                                 (1,858)            1,132
                                                      -------           -------
Net increase in cash                                      143             2,280
Cash at beginning of period                             1,563               925
                                                      -------           -------
Cash at end of period                                 $ 1,706           $ 3,205
                                                      =======           =======
</TABLE>


                       SEE ACCOMPANYING NOTES TO CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>   8

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


Non-cash disclosure:

On July 1, 1998, the Company acquired the assets and assumed certain liabilities
of Trade Source International, Inc. In connection with the acquisition, cash was
paid as follows (in thousands):

<TABLE>
<S>                                                <C>
Fair value of assets acquired
  (including goodwill)                             $ 19,269
Liabilities assumed                                (  8,269)
Stock issued                                       (  7,379)
                                                   --------
Cash paid                                             3,621
Less:  cash acquired                                 (1,580)
                                                   --------
Net cash paid for acquisition                      $  2,041
                                                   ========
</TABLE>


                       SEE ACCOMPANYING NOTES TO CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS


<PAGE>   9


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

                               SEPTEMBER 30, 1999
                                   (Unaudited)


Note 1 - BASIS OF PREPARATION AND PRESENTATION

The accompanying unaudited 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 incorporated by
reference 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 months ended September 30, 1998 have been
reclassified to conform with the current quarter 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, the Company's Board of Directors authorized the Company's
management to repurchase an additional 400,000 shares of the Company's
outstanding common stock. At September 30, 1999, the Company had repurchased
400,000 shares at an aggregate cost of $3,861,000 related to this plan.


<PAGE>   10

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

                               SEPTEMBER 30, 1999
                                   (Unaudited)


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
                                                    September 30,      September 30,
                                                        1999               1998
                                                    ------------       ------------
                                                 (In thousands, except per share data)
<S>                                                 <C>                <C>
Basic and diluted EPS:
Numerator: Net income                                 $  1,562            $2,196
                                                      ========            ======

Basic denominator:  Common
  shares outstanding                                     7,250             7,545
                                                      ========            ======

Basic EPS                                             $    .22            $  .29
                                                      ========            ======

Diluted denominator:  Common
  shares outstanding                                     7,250             7,545
Options                                                     --                15
                                                      --------            ------
Total shares                                             7,250             7,560
                                                      ========            ======

Diluted EPS                                           $    .22            $  .29
                                                      ========            ======
</TABLE>


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 September 30, 1999 was $5,275,000,
which decreases as payments are made on the long-term debt. Under this
agreement, the Company has contracted to pay a variable rate


<PAGE>   11

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

                               SEPTEMBER 30, 1999
                                   (Unaudited)


Note 4 - DERIVATIVE FINANCIAL INSTRUMENTS (con't)

equal to LIBOR plus 2.43% (7.81% at September 30, 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 ($43,835) at September 30, 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 TSI. The Craftmade segment
primarily derives it 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>   12


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

                               SEPTEMBER 30, 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
  September 30, 1999:
Net sales from external customers                     $13,303        $ 8,351        $21,654
Operating profit                                        2,348            781        $ 3,129

For the three months ended September 30, 1998:
Net sales from external customers                     $12,219        $11,273        $23,492
Operating profit                                        2,560          1,720        $ 4,280
</TABLE>


<PAGE>   13

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

Net sales decreased $1,838,000, to $21,654,000 for the three month period ended
September 30, 1999 from $23,492,000 for the same three month period last year.
Net sales from Craftmade increased $1,084,000, to $13,303,000 for the three
months ended September 30, 1999 from $12,219,000 for the same three month period
last year. This 8.9% increase was primarily the result of the success of several
recently-introduced fan styles, the growing acceptance of its outdoor lighting
product line and the strength of the housing market. The Company's management
anticipates that Craftmade will continue to benefit from its marketing strategy
of dynamic expansion of its product lines with unique, innovatively-designed
products and the selective cross-marketing of TSI's outdoor lighting line to
Craftmade's customer base. This increase was offset by a $2,922,000 decrease in
TSI's net sales, to $8,351,000 for the three months ended September 30, 1999
from $11,273,000 for the same three month period last year. This decrease was
primarily attributable to one of TSI's customers reducing their level of
purchasing during the first quarter of fiscal 1999 while they continued to sell
through previously purchased inventory. The Company's management anticipates
that this customer's purchasing will strengthen as new products are introduced
over the next three quarters.

Gross profit for the three months ended September 30 decreased to $8,105,000, or
37.4% of net sales, in 1999 from $8,476,000, or 36.1% of net sales, in 1998.
This decrease in gross profit was


<PAGE>   14

primarily the result of the decrease in TSI's net sales and a slight decrease in
TSI's gross profit margin, to 26.7% in 1999 from 28.3% in 1998. The decrease in
TSI's gross profit margin was the result of an increase in direct shipment
sales, which carry lower margins than domestic shipments. The Company's
management anticipates that gross profit margins for TSI will remain at current
levels for this fiscal year. TSI's gross profit decrease was partially offset by
a $585,000 increase in Craftmade's gross profit, to $5,874,000, or 44.2% of net
sales, in 1999 from $5,289,000, or 43.3% of net sales, in 1998. Craftmade's
increase in gross profit margin is attributable to the continued success of
Craftmade's higher-margin, proprietary products. The Company's management
anticipates that Craftmade's gross profit margins will stabilize at current
levels provided that it continues to benefit from the increasing demand for its
proprietary products.

Total selling, general and administrative expenses increased to $4,765,000, or
22.0% of net sales, for the three months ended September 30, 1999 from
$3,994,000, or 17.0% of net sales, for the same three month period last year.
This increase was primarily the result of a $782,000 increase in selling,
general and administrative expenses of Craftmade, to $3,430,000, or 25.8% of net
sales, in 1999 from $2,648,000, or 21.7% of net sales, in 1998. Craftmade's
increased selling, general and administrative expenses are primarily
attributable to increased freight expense associated with higher rates imposed
by its carriers. The Company has also increased its labor force to meet the
demands of higher sales and the acquisition of TSI. These increases have
contributed to the increase in absolute dollar value of selling, general and
administrative expenses as well as a percentage of net sales. In addition,
commissions and certain other costs directly correlated to Craftmade's sales
have increased accordingly. The Company's management anticipates that, for the
near term, selling, general and administrative expenses for Craftmade will
approximate the current level. Selling, general and administrative expenses for
TSI decreased $11,000, to $1,335,000, or 16.0% of net sales, in 1999 from
$1,346,000, or 11.9% of net sales, in 1998. This increase in percentage was
primarily the result of decreased sales. Lower selling, general and
administrative expenses as a percentage of sales were achieved by TSI due to
sales from direct shipments from vendor facilities. The Company's management
anticipates that new product introductions will increase TSI's sales, and thus
selling, general and administrative expenses as a percentage of sales will be
lower than the current level.

Net interest expense decreased $70,000 to $338,000 for the three months ended
September 30, 1999 from $408,000 for the same three month period last year. This
decrease was primarily the result of a more favorable borrowing rate and lower
interest on the facility note which is being reduced by prepayments. This
decrease was partially offset by $3,000,000 in additional borrowings under the
Company's line of credit during the quarter ended September 30, 1999. The
Company's management intends to pursue a strategy of debt reduction as excess
cash flow is available.


<PAGE>   15

Minority interest of $344,000 and $266,000 for the three months ended September
30, 1999 and 1998, respectively, represented the 50% ownership of PHI by a
non-company owned shareholder. The non-company owned shareholder interest has
been accounted for as minority interest. TSI is able to exert control over the
operations of PHI by virtue of having a majority of the Board of Directors.


LIQUIDITY AND CAPITAL RESOURCES

The Company's cash increased $143,000, from $1,563,000 at June 30, 1999 to
$1,706,000 at September 30, 1999. The Company's operating activities provided
cash of $2,040,000, primarily attributable to the Company's net income from
operations.

The $39,000 of cash used for investing activities related to the purchase of
general warehouse, office and computer equipment.

The $1,858,000 of cash used for financing activities was primarily the result of
(i) the repurchase of 422,500 shares of the Company's common stock pursuant to
the Company's stock repurchase plans, at an aggregate cost of $4,069,000, (ii)
distributions to PHI's minority interest shareholder of $457,000, (iii)
principal payments of $193,000 on the notes payable, and (iv) cash dividends of
$139,000. These amounts were partially offset by the net advance of $3,000,000
under the Company's lines of credit. It is management's intention to repurchase
its 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 September 30, 1999, subject to continued compliance with certain covenants
and restrictions, the Company had $14,000,000 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 $1,950,000 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. In
addition, it is management's intention to utilize excess cash flow to reduce
outstanding indebtedness.

At September 30, 1999, $5,275,000 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.


<PAGE>   16

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.

The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
00 as the year 1900 rather than the year 2000. The Year 2000 Issue potentially
not only impacts information technology systems such as traditional computer
systems, but also non-information technology systems containing microcontrollers
or other embedded technology, such as elevators and other equipment and
machinery. The Year 2000 Issue could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities. As a result, the Year 2000 Issue could
have a material adverse impact on the Company's business and its customers in
ways that cannot be fully determined at this time.

State of Readiness and Costs. The Company's analysis of the Year 2000 Issue
encompasses four phases: assessment, renovation, testing and implementation. The
assessment phase involves an investigation of the Company's systems for
potential Year 2000 Issues. The renovation phase involves the modification of
the Company's current systems, and the testing phase involves the validation of
these modifications. The implementation phase involves the ultimate use of the
converted systems by the Company.

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.

In addition to the current assessment of its systems, the Company is working
with its key suppliers, vendors, customers and other third parties with which it
has a material relationship to assist such parties in achieving compliance with
respect to the Year 2000 Issue in those systems affecting the Company's
operations. Although the Company believes that such persons are working
diligently to properly address the Year 2000 Issue, the Company cannot guarantee
that these third parties will convert their systems in a timely manner, or that
a failure to convert by another company or a conversion that is incompatible
with the Company's systems would not have a material adverse effect on the
Company. The Company's management believes that, although the nature of business
of Craftmade's primary vendor limits its exposure to the Year 2000

<PAGE>   17

Issue, the distribution channels utilized by that vendor could present risk as
it relates to the Year 2000 Issue.

Risks and Contingency Plans. The Company has created a contingency plan in the
event that the Company's efforts to address the Year 2000 issues are not
successful. Should the Company's Year 2000 efforts be unsuccessful, the Company
is not currently able to estimate the effects on its results of operations,
liquidity and financial condition.



<PAGE>   18


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 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 $5,275,000 on September 30, 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 $52,750. Consequently, an increase in LIBOR of five percent (5%)
would result in an estimated annualized increase of interest expense for the
Company of approximately $263,750.



<PAGE>   19


                                     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

                           not applicable

Item 5.           Other Information

                           not applicable

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

<PAGE>   20

                                      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.

                           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


<PAGE>   21

                                      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.

                           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


<PAGE>   22

                                      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.

                           10.16      Confirmation under ISDA Master Agreement,
                                      dated July 23, 1999, from Chase Bank of
                                      Texas, National Association to Craftmade
                                      International, Inc.

                           27.1      Financial Data Schedule.

                  b).      Reports on Form 8-K

                           On July 9, 1999, the Company filed a Form 8-K,
                           reporting the adoption of a Stockholder Rights Plan.


<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     November 12, 1999          /s/  James R. Ridings
    -------------------------       ----------------------------------
                                             JAMES R. RIDINGS
                                            President and Chief
                                             Executive Officer


                                    /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
</TABLE>


<PAGE>   25

<TABLE>
<S>                                   <C>
                                      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 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
</TABLE>


<PAGE>   26

<TABLE>
<S>                                   <C>
                                      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, 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.

                           10.16      Confirmation under ISDA Master Agreement,
                                      dated July 23, 1999, from Chase Bank of
                                      Texas, National Association to Craftmade
                                      International, Inc.

                           27.1      Financial Data Schedule.
</TABLE>