<PAGE>   1
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934

                                       OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 30, 1998           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 S. ROYAL LANE, SUITE 100                                  75019
          COPPELL, TEXAS                                       (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

               REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
                                 (972) 393-3800

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

<TABLE>
<CAPTION>
     TITLE OF EACH CLASS                               NAME OF EACH EXCHANGE
                                                       ON WHICH REGISTERED
<S>                                                    <C>
COMMON STOCK, $0.01 PAR VALUE                          NASDAQ NATIONAL MARKET
                                                       SYSTEM
</TABLE>

         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, AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS: YES X  NO
                                      ---   ---

         INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. X
                            ---

         THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF
THE REGISTRANT AS OF JULY 31, 1998, WAS $89,405,135.

         THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S $.01 PAR VALUE
COMMON STOCK AS OF JULY 31, 1998, WAS 5,036,909.

                       DOCUMENTS INCORPORATED BY REFERENCE

PORTIONS OF THE REGISTRANT'S PROXY STATEMENT PERTAINING TO THE REGISTRANT'S 1998
ANNUAL MEETING OF SHAREHOLDERS ARE INCORPORATED BY REFERENCE INTO PART III OF
THIS REPORT.


<PAGE>   2



                                      INDEX


<TABLE>
<S>             <C>                                                                                          <C>
PART I

       Item 1.   Business...................................................................................   1

       Item 2.   Properties.................................................................................   7

       Item 3.   Legal Proceedings..........................................................................   7

       Item 4.   Submission of Matters to a Vote of Security Holders........................................   7


PART II

       Item 5.   Market for the Registrant's Common Stock and Related
                 Security Holder Matters....................................................................   8

       Item 6.   Selected Financial Data....................................................................   9

       Item 7.   Management's Discussion and Analysis of Financial
                 Condition and Results of Operations........................................................  10

       Item 7A.   Quantitative and Qualitative Disclosures About Market Risk................................  16

       Item 8.   Financial Statements and Supplementary Data................................................  16

       Item 9.   Changes in and Disagreements with Accountants on
                 Accounting and Financial Disclosure........................................................  16


PART III

       Item 10. Directors and Executive Officers of the Registrant..........................................  17

       Item 11. Executive Compensation......................................................................  17

       Item 12. Security Ownership of Certain Beneficial Owners
                and Management..............................................................................  17

       Item 13. Certain Relationships and Related Transactions..............................................  17


PART IV

       Item 14. Exhibits, Financial Statements, Financial Statement
                Schedules and Reports on Form 8-K...........................................................  18

       Signatures  .........................................................................................  19
</TABLE>


<PAGE>   3



                                     PART I

Item 1. Business

THE COMPANY

Craftmade International, Inc. (the "Company") was incorporated under the laws of
the State of Texas on July 16, 1985 under the name of Mastercraft International,
Inc. for the purpose of distributing ceiling fans, furniture, hardware and
plumbing products. In January 1986, the Company limited its operations to the
marketing and distribution of ceiling fans and related products and accessories.
An arrangement with Fanthing Electrical Corp., ("Fanthing"), Taichung, Taiwan
was completed in August 1986 for the manufacture of ceiling fans designed to the
Company's specifications. The Company's ceiling fan product line consists of 24
series and 148 basic models of premium priced to lower priced ceiling fans, and
represents approximately 68% of the Company's current product sales. The Company
also markets 78 light kit models in various colors for attachment and use with
the Company's ceiling fans or other ceiling fans, parts and accessories for its
ceiling fans and light kits and 14 series of bathstrip lighting. The Company
purchases substantially all of its light kits from Sunlit Industries ("Sunlit"),
Taipei, Taiwan. The combination of design and functional features which
characterize Craftmade ceiling fans have made them, in management's judgement,
one of the most reliable, durable, energy efficient and cost effective ceiling
fans in the marketplace. The Company's national sales organization, which
consists of 33 independent sales representative groups employing approximately
58 sales representatives, markets the Company's products to in excess of 1,500
lighting showroom and electrical wholesaler locations which sell primarily to
the new home construction, remodeling and replacement markets. These markets are
comprised principally of private residences and, to a lesser extent, offices,
restaurants and certain public facilities.

On July 26, 1990, the Company formed Durocraft International, Inc. ("Durocraft")
and completed an agreement and plan of merger with DMI Products, Inc. ("DMI").
Durocraft Design Manufacturing, a division of Durocraft, is a lamp manufacturer
whose customer base includes major specialty retail chains. A division of
Durocraft, Global Electronics, is a wholesaler of computer cable and
accessories.

On December 27, 1991, the Company changed its state of incorporation from Texas
to Delaware, at which time all of the Company's outstanding common stock was
exchanged, share for share, for $.01 par value common stock.

On September 30, 1992, the Company formed C/D/R Incorporated located in
Wilmington, Delaware for the purpose of holding all of the rights to the
Company's trademarks. Management believes that these intangible assets have
value and the Company will defend them as necessary.

BACKGROUND

Prior to the advent of air conditioning, ceiling fans were used in homes and
other facilities to make hot weather tolerable by reducing air stratification.
Developments in air conditioning technology and the pervasive use of central air
conditioning and individual air conditioning units limited the market for
ceiling fans until the mid 1970's, when high energy costs led to the rediscovery
of ceiling fans primarily due to their potential for energy conservation.
Additional benefits of utilizing ceiling fans during winter and less temperate
periods to circulate warm air concentrated near ceilings down to floor level
were also recognized at this time.

The Company estimates that annual unit sales of ceiling fans in the United
States grew substantially in the 1970's and through 1983, and then declined and
have stabilized since that time. Management believes that the principal factors
underlying growth of unit sales between 1976 and 1983 were increased penetration
of the residential household market, particularly in the northern and western
sections of the United States (areas which historically have had a
disproportionately low percentage of ceiling fan ownership), a continued shift
to lower and medium priced ceiling fans, an increase in multiple fan ownership
and replacement purchases. Management attributes the moderation of unit sales
since 1983 to the initial saturation in the northern and western sections of the
United States following limited usage prior to that time. The Company does not


                                      -1-
<PAGE>   4

believe that industry unit sales of ceiling fans in the United States market
will fluctuate substantially in the foreseeable future. The Company will attempt
to expand future sales of its ceiling fans by increasing its market share.

PRODUCTS

All of the Company's ceiling fans are manufactured by Fanthing, and
substantially all of its light kits are purchased from Sunlit. Fanthing
manufactures the ceiling fans based on specifications provided by the Company.
The finished products are packaged and labelled by the manufacturer under the
Company's trade name, Craftmade (R). Light kits used in conjunction with ceiling
fans are similarly produced and packaged. Bathstrip lighting is manufactured by
Sunlit and packaged and labelled by the manufacturer under the Accolade(R)
tradename.

CEILING FANS -- The Company's ceiling fan product line consists of 24 series and
148 basic models of ceiling fans for sales to the new home construction,
remodeling and replacement markets. Series are classified on the basis of cost,
air movement and appearance. Craftmade fans are manufactured and assembled in a
variety of colors, styles and finishes and can be used either in conjunction
with or independent of Craftmade light kits. Series lines include Early
American, Traditional and Modern High-Tech Decor and, depending on the size,
finish and other features, range in price from the premium Cameo, Quest,
Crescent and Wellington series to various low-end builder series. Suggested
retail prices for the various Craftmade fans ranged at June 30, 1998 from $70
(builder series) to $780 (Cameo Series), which the Company believes are
favorably priced relative to other mid-level and premium ceiling fans
distributed by Hunter and Casablanca, yet represent comparable quality and
performance characteristics.

The Company's ceiling fans come in five motor sizes, five blade sizes and 35
different decorative finishes. The range of styles and colors give consumers the
ability to select ceiling fans for any style of house, interior decoration or
living and working area, including outdoor patios. All Craftmade fans include a
dual capacitor system to control motor starting and running; a 16-pole motor for
greater efficiency and smoother performance; aluminum rotors die cast for cool
running; two sealed heavy duty bearings which are permanently lubricated;
balanced blades and blade arms to minimize vibration; blade arm gaskets for
quieter performance; reversible switching for summer and winter energy saving;
shipping blocks to maintain alignment in transit; and three-speed switches for
high, medium, low and off. In management's judgement, although not specifically
confirmed by any independent testing service, these features enable the
Company's ceiling fans to perform efficiently, consistently and for extended
periods. Management also believes that, in addition to these design features,
the quality control program adhered to by Fanthing in the course of
manufacturing contributes significantly to the quality and durability of the
Craftmade fan. All Craftmade fans carry a limited warranty against defects in
workmanship and materials covering the entire ceiling fan for one year and also
provides a 25 year warranty with respect to the motor contained in all fans
except the Cameo, Crescent, CXL, High-Tech, Omni, Phoenix, Presidential I,
Presidential II, Quest, Sergio, and Wellington Series, which carry a limited
lifetime warranty. In addition, while the Company's agreement with Fanthing does
not contain provisions relating to adjustments or returns as a result of product
defect, Fanthing has previously extended the Company full credit for any product
returns during the period of their working relationship.

LIGHT KITS -- The Company markets 78 models of light kits in various colors
which may be utilized with the Company's ceiling fans or other ceiling fans.
These kits, which consist of the glass shades and fitters, presently represent
approximately 15% of the Company's product sales. As of June 30, 1998, suggested
retail prices for the Company's light kits ranged from $16 to $250. Since the
demand for the Company's Elegance Collection, which includes lead crystal and
alabaster designer shades, has increased, the Company will continue its efforts
to expand these premium lines.

LAMPS -- The Company assembles and markets a variety of lamp styles for sale to
certain major retail chains and catalog houses to be sold under private brand
labels. The lamps are assembled at the Company's facilities in Coppell, Texas
and consist of wood, solid brass, zinc coated, crystal, ceramic and porcelain
table, floor and desk lamps as well as hanging lantern kits. At the present
time, all of the Company's lamps are sold at retail prices ranging from $58 to
$274. Sales of the Company's lamps account for approximately 4% of the Company's
product sales.

                                      -2-
<PAGE>   5

BATHSTRIP LIGHTING - The Company markets 14 series of bathstrip lighting in 7
different lengths and 14 different decorative finishes. Bathstrip lighting
presently represents 6% of the Company's product sales. As of June 30, 1998,
suggested retail prices for this product line ranged from $12 to $200. The
Company will add finishes and series based on customer demand.

ACCESSORIES AND CABLE COMPONENTS -- The Company also markets a variety of
designer and standard wall controls to regulate the speed and intensity of
ceiling fans and lighting fixtures and universal downrods for use with ceiling
fans. In addition, following the acquisition of DMI Products, Inc. in July 1990,
the Company also distributes various cable components, including connectors,
switches and compatibles acquired from Far East manufacturers for use with
computers and telephone board circuitry. Sales of such accessories and cable
components presently account for approximately 7% of the Company's product
sales.

MANUFACTURING

The Company's ceiling fans, bathstrip lighting and substantially all of its
light kits and certain accessories are produced by Fanthing and Sunlit. The
Company has had a working agreement with Fanthing since August 1986 to provide
the Company with all of its ceiling fans and certain fan accessories. The
Company selected Fanthing to manufacture the Craftmade fan based on its proven
capability to produce and ship a wide variety of ceiling fans on a cost
effective basis while at the same time maintaining excellent quality control in
the manufacturing process. According to information made available to the
Company, Fanthing was organized in 1981 and manufactures ceiling fans from a
manufacturing facility consisting of in excess of 21,000 square feet in
Taichung, Taiwan. The Company believes that a substantial part of Fanthing's
revenues are derived from sales of ceiling fans to the Company. On December 7,
1989, the Company and Fanthing entered into a formal written agreement which is
terminable on 180 days prior notice. The written agreement does not obligate
Fanthing to produce and sell products to the Company in any specified quantity,
nor does it obligate Fanthing to sell products to the Company at a fixed price.
Fanthing is permitted under the arrangement to manufacture ceiling fans for
other distribution provided such ceiling fans are not a replication of
Craftmade's series or models. Fanthing also manufactures certain ceiling fan
accessories, such as down rods, which are sold by the Company independently of
its ceiling fans.

Fanthing has provided the Company with a $1,000,000 credit facility, pursuant to
which Fanthing will manufacture and ship ceiling fans prior to receipt of
payment from the Company. Accordingly, payment can be deferred until delivery of
such products. At present levels, such credit facility is equivalent to
approximately one month's supply of ceiling fans and represents a supplier
commitment which, in the opinion of the Company, is unusual for the industry.
Fanthing is not required to provide this credit facility under its agreement
with the Company, and Fanthing may discontinue this arrangement at any time. The
Company places orders with Fanthing in anticipation of normally recurring
orders. In the ordinary course of business, orders are filled within 60 days
which includes approximately 20 days for transport. All orders are in U.S.
dollars. In the event of any fluctuation in exchange rates exceeding
approximately 5%, any future orders placed by the Company may be adjusted
accordingly. Ceiling fans are shipped in container-size lots, generally
consisting of 1,600 fan units. Delivery is made in Dallas, Texas upon
presentment of documents by the Company's designated freight forwarder following
payment for such containers at Fanthing's bank in Taiwan. While the Company
believes the present arrangement for purchases and delivery has been generally
satisfactory, the demand for Craftmade fans has periodically exceeded the
Company's delivery capabilities.

Under a stock purchase agreement between the Company and Fancy Industrial, Inc.
("Fancy"), a Texas corporation and wholly-owned subsidiary of Fanthing, the
Company, at its option, may repurchase 151,794 shares owned by Fancy Industrial,
Inc. for an aggregate purchase price of $137,774. The Company has no intention
of reacquiring any shares from Fancy at this time. The Company believes that its
relationship with Fanthing and its ability to supply quality ceiling fans at
competitive prices have been critical to the success of the Company. The Company
believes its relationship with Fanthing to be excellent and foresees no reason,
based on its association to date, for such relationship to deteriorate. If for
any reason Fanthing were to discontinue its relationship with the Company in the
future or should it be unable to continue to supply


                                      -3-
<PAGE>   6

sufficient amounts of Craftmade products, the Company would be required to seek
alternative sources of supply. There can be no assurance that any such
alternative source of supply will produce products of comparable quality to
those produced by Fanthing, or that any such source will sell products to the
Company at prices and on terms as favorable as those presently applicable to
purchases made by the Company from Fanthing.

The Company purchases its bathstrip lighting and substantially all of its light
kits from Sunlit which is located in Taipei, Taiwan. According to information
made available to the Company, Sunlit was organized in January 1989 and occupies
a manufacturing facility consisting of approximately 10,000 square feet. The
Company believes that substantially all of Sunlit's revenues are derived from
the sale of lighting kits to the Company. Light kit orders are placed
independently of ceiling fan orders, but are also received in container-size
lots generally consisting of up to 4,500 light kit units under payment and
delivery arrangements similar to those for ceiling fans. The Company offers a
variety of light kits in various finishes and colors, as well as a variety of
fixtures designed for ceiling fans. The Company also offers a variety of glass
selections for the various light fixtures, including blown glass, beveled glass
and crystal. Fixtures and glass are shipped from Sunlit in the light kit
containers. The Company's wall controls, timers and switches as well as certain
of its ceiling fan blades, representing approximately 1% of the Company's
product sales, are manufactured by companies based in the United States. The
Company offers a variety of custom blade sets in various sizes and finishes,
including unfinished oak, ash and other wood grains and in clear, mirror, gold
mirror, black, smoke and antique white acrylic. The finished products are
packaged and labeled under the Company's Craftmade brand name.

The Company assembles its lamps at its Coppell facility which includes the
placement of the base, cap and shade together with the necessary wiring.
Substantially all of the components are manufactured by domestic and foreign
manufacturers located in Taiwan, China and Germany; however, the Company does
undertake limited manufacturing of certain shade components. The Company
purchases its components on a non-exclusive basis from such suppliers on either
open account or through letters of credit, and no individual manufacturer
accounts for in excess of 3% of such components.

DISTRIBUTION

The Company's products are marketed through in excess of 1,500 lighting showroom
and electrical wholesaler locations specializing in sales to the new home
construction, remodelling and replacement markets. The Company's ceiling fans,
light kits and accessory parts are distributed through 33 independent sales
representative groups on a national basis (except for Alaska and Hawaii). Each
sales representative group is selected to represent the Company in a specific
market area. The independent sales representative groups comprise a sales force
for the Company's products of approximately 58 sales representatives. Sales
representatives represent the Company exclusively in the sale of ceiling fans.
Sales representatives are paid commissions on such sales. During the fiscal year
ended June 30, 1998, no single lighting showroom or electrical wholesaler
accounted for more than 2% of the Company's sales.

Sales representatives are carefully selected and continually evaluated in order
to promote high level representation of the Company's products. Company
personnel provide initial field training to new sales representatives covering
features, styles, operation and other attributes of Craftmade products to enable
representatives to more effectively market the Company's products. Additional
training is provided at least annually, especially for new product series, at
semi-annual trade shows held in Dallas, Texas and elsewhere. Management believes
it has assembled a highly motivated and effective sales representative
organization which has demonstrated a strong commitment to the Company and its
products. Management further believes that the strength of its sales
representative organization is primarily attributable to the quality and
competitive pricing of the Company's products as well as the ongoing
administrative and marketing support that the Company provides to its sales
representatives.

As of June 30, 1998, of the Company's lamps sold to major retail chains and
catalog houses to be distributed under private brand labels, approximately 85%
were sold to Bombay Company. The balance of these lamp sales are made to other
retail chains including Tuesday Morning, the Horchow Mail Order Catalog and Old
America Stores.

                                      -4-
<PAGE>   7

In fiscal year 1997, the lamp division experienced a decrease in lamp sales to
the lamp division's primary customer from which it has not recovered. Although
orders to that customer appear to have stabilized over the last twelve months,
this division is currently pursuing an aggressive strategy of inventory
reduction through select "seconds" retailers . The Company's management
originally anticipated that this inventory reduction could be accomplished by
June 30,1998; however, due to a limited resource of labor available, the
Company's management has reevaluated the time frame and estimates completion
between December 1998 and March 1999. Management will continue to closely
monitor this division and its financial results to determine the feasibility of
this division continuing as a single-customer manufacturer with limited overhead
or the dissolution of this division. Management currently believes that the net
lamp inventory existing at June 30, 1998 of $1,676,371 can be liquidated at a
small profit.

The Company acts as a distributor for various overseas manufacturers of a range
of cable components for use with computers and telephone board circuitry, which
account for approximately 3% of the Company's total product sales.

MARKETING

The Company relies primarily on the reputation of Craftmade ceiling fans and
light kits for high quality and competitive prices and the efforts of its sales
representative organization in order to promote the sales of the Company's
products. The principal market for the Company's products is the new home
construction, remodeling and replacement markets. The Company utilizes
advertising in home lighting magazines, particularly in special editions devoted
to ceiling fans and lighting fixtures, and broadly distributes its product
catalog. The Company also promotes its ceiling fans and light kits at
semi-annual trade shows in Dallas (January and July), and the Company maintains
a showroom at the Dallas Trade Mart. The Company provides the same 25- year
limited warranty on the fan motor for each series of its ceiling fans, and
includes a one year limited warranty against defects in workmanship and
materials to cover the entire ceiling fan. The Company also provides a limited
lifetime warranty on the Cameo, Crescent, CXL, High-Tech, Omni, Phoenix,
Presidential I, Presidential II, Quest, Sergio, and Wellington Series ceiling
fans. The Company believes these warranties are highly attractive to dealers and
consumers alike.

The Company has a 24-hour product shipment policy. In order to meet these policy
delivery requirements and to ensure that it has sufficient goods on hand from
its overseas suppliers, the Company maintains a significant level of inventory.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources."

PRODUCT EXPANSION

The Company continually expands its ceiling fan product line, providing
proprietary products to its customer base in order to meet current and
anticipated demands for unique, innovative products.

The Company's proposed expansion of its light kit product line will include the
development of new lighting fixture product lines to be marketed under the
Craftmade name, including under cabinet lighting, low voltage outside lighting
and additional parts and accessories complementing its various product lines.
The Company believes that such proposed new product lines will complement its
light kit product line and that such product lines can be marketed through the
same sales representatives, showrooms and electrical wholesalers which presently
distribute the Company's ceiling fans and light kit products. The Company is
continuing discussions with Sunlit and other manufacturers for the production of
such new lighting fixture lines.

Related to the Company's product expansion plans, effective July 1,1998, the
Company entered into an agreement and plan of merger with Trade Source
International, Inc. a California corporation (TSI California) engaged in the
wholesale distribution of outdoor lighting fixtures to mass merchandisers. As a
result, the Company acquired TSI California from its existing shareholders and
merged it into the Company's wholly-owned subsidiary, Trade Source
International, Inc., a Delaware corporation (TSI Delaware). The total purchase
price was approximately $11 million paid in a combination of approximately $3.6
million cash and


                                      -5-
<PAGE>   8

approximately 656,000 shares of Craftmade's common stock that had previously
been repurchased by the Company related to the Company's stock repurchase
program. This transaction will be accounted for under the purchase method of
accounting and the results of operations of TSI Delaware will be consolidated
subsequent to July 1, 1998. The Company will pursue opportunities to
cross-market products between TSI Delaware and the Company's ceiling fan
division.

The Company's management will continue to search for opportunities for product
expansion, both internally and through acquisitions, that it considers
complementary to the Company's existing product lines.

 The Company's product sales, particularly ceiling fans, are somewhat seasonal
with sales in the warmer first and fourth quarters being historically higher
than in the two other fiscal quarters.

BACKLOG

As substantially all of the Company's ceiling fan and lighting kit products are
shipped to customers within 48 hours following receipt of orders, backlog is not
material to the Company's operations. The Company at present is accepting orders
for ceiling fans, bathstrip lighting, and light kits based on product
availability.

COMPETITION

The ceiling fan and lighting fixture market is highly competitive at all levels
of operation. Some of the major companies in this industry include Casablanca,
Hunter, Monte Carlo, Quorum, Emerson Electric and Fasco. A number of other well
established companies are also currently engaged in activities that compete
directly with those of the Company. Some of the Company's competitors are better
established, have longer operating histories, have substantially greater
financial resources or have greater name recognition than the Company; however,
the Company believes that the quality of its products, the strength of its
marketing organization and the growing recognition of the Craftmade name will
enable the Company to compete successfully in these highly competitive markets.

INDEPENDENT SAFETY TESTING

All of the ceiling fans, light kits and lamps sold by the Company in the United
States are tested by Underwriter's Laboratores (UL), which is an independent
non-profit corporation which tests certain products, including ceiling fans and
lighting fixtures, for public safety. Under its agreement with UL, the Company
voluntarily submits its products to UL, and UL tests the products for safety. If
the product is acceptable, UL issues a listing report which provides a technical
description of the product. UL provides the manufacturers with procedures to
follow in manufacturing the products. Electrical products which are manufactured
in accordance with the designated procedures display the UL listing mark, which
is generally recognized by consumers as an indication of a safe product and
which is often required by various governmental authorities to comply with local
codes and ordinances. The contract between the Company and UL provides for
automatic renewal unless either party cancels as a result of default or gives
applicable prior notice.

PRODUCT LIABILITY

The Company is engaged in a business which could expose it to possible claims
for injury resulting from the failure of its products sold. While no material
claims have been made against the Company since its inception and the Company
maintains $10,000,000 in product liability insurance, there can be no assurance
that claims will not arise in the future or that the coverage of such policy
will be sufficient to pay such claims.

PATENTS AND TRADEMARKS

The Company does not believe that patent protection is significant to most of
the Company's products or current business operations. The Company holds a
patent on its Cathedral Ceiling Adapter and the license on the patents for the
Crescent, Wellington, Cameo, and Quest Series of fans and the Carousel light
kit. The Company also holds certain other license agreements which is in the
ordinary course of its business. Fanthing holds certain Taiwanese patents
covering specific technology employed in Craftmade ceiling fans, but the


                                      -6-
<PAGE>   9

Company does not believe that such patents are material to the production of
Craftmade products. The Company's trademarks, Craftmade (R),Accolade (R) and
Durocraft (R), are registered with the United States Patent and Trademark
office.

EMPLOYEES

As of July 31, 1998, the Company employed a total of 75 full time employees,
including three executive officers, fourteen managers, ten clerical and
administrative personnel, ten marketing, twenty-five warehouse and thirteen
production personnel. The Company's employees are not covered by any collective
bargaining agreements, and the Company believes its employee relations are
satisfactory.

Item 2. Properties

The Company's headquarters are located in Coppell, Texas . The facility consists
of approximately 378,000 square feet of general office and warehouse space. The
Company purchased this facility at a price of approximately $9,200,000, which
the Company financed through a financial institution at an interest rate of
8.125% for a term of twelve years. Approximately 80,000 square feet of this
facility was leased to a related party,TSI California, at an annual rate of
$240,000. The Company's management believes that this facility will be
sufficient for its purposes for the foreseeable future.

The Company also leases permanent display facilities at the Dallas Trade Mart.
The lease will expire in September 2003 and provides for monthly rental payments
of $3,175.

Item 3. Legal Proceedings

The Company is currently not a party to any material legal or administrative
proceedings.

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

Not applicable






                                      -7-
<PAGE>   10
                                     PART II


Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters

Since the initial public offering of the Company's Common Stock at $2.33 per
share,adjusted for the Company's three-for-two stock split on April 16, 1990,
the Common Stock has been traded on NASDAQ under the symbol CRFT. On July 16,
1992, the Company was approved for inclusion in the National Market System of
NASDAQ.

The following table sets forth for the periods indicated the high and low
closing sales prices per share of Common Stock on the NASDAQ National Market
System, as reported by NASDAQ. On September 26, 1997, the Board of Directors
declared a three-for-two split of the Company's common stock effected in the
form of a 50% stock dividend. New shares were issued November 15, 1997 to
holders of record as of the close of business on October 31, 1997. These prices
have been restated to reflect the Company's stock split.


<TABLE>
<CAPTION>
                                                                               High          Low
                                                                               ----          ---
<S>                                                                             <C>            <C>
                  Fiscal Year Ended June 30, 1997:
                      First Quarter                                             5              4
                      Second Quarter                                            4 5/6          3 11/12
                      Third Quarter                                             6              4 1/3
                      Fourth Quarter                                            5 5/12         4 7/12

                  Fiscal Year Ended June 30, 1998:
                      First Quarter                                             9 1/12         5
                      Second Quarter                                           12 1/2          8 2/3
                      Third Quarter                                            14 3/4         10 3/8
                      Fourth Quarter                                           17 5/8         14 3/8

                  Fiscal Year Ended June 30, 1999:
                      First Quarter (Through July 31, 1998)                    19 3/8         17 1/2
</TABLE>


On July 31, 1998, there were 101 holders of record of the Company's Common
Stock.

North American Transfer Company, 147 West Merrick Road, Freeport, New York
11520, is the Transfer Agent and Registrar for the Company's Common Stock.

On March 15, 1994, the Company's Board of Directors adopted a policy to pay
$0.01 per share dividend on a quarter to quarter basis within the discretion of
the Board out of the capital surplus or profits of the Company. On April 30,
1997, the Company's Board of Directors increased the quarterly dividend to $0.02
per share. The quarterly dividends may not exceed 40% of the Company's net
profit before taxes as restricted by the Company's revolving line of credit.
Pursuant to this policy, the Board has declared and paid a quarterly dividend
for each quarter since March 31, 1994.

COMPANY COMMON STOCK PRICE PERFORMANCE GRAPH

The following graph provides an indicator of and compares the percentage change
of cumulative total shareholder return of the Company's Common Stock against the
cumulative total return of the Russell 2000 Index and the NASDAQ Composite Index
since the initial public offering of the Company's common stock on April 16,
1990. This graph assumes $100 was invested on April 16, 1990 in the Company's
common stock, the Russell 2000 Index and the NASDAQ Composite Index. Both the
Russell 2000 Index and the NASDAQ Composite Index exclude the Company. This
graph also assumes that the Company's quarterly dividend was reinvested in the
Company's stock.



                                      -8-
<PAGE>   11
                      [PRICE PERFORMANCE CHART SHOWN HERE]

<TABLE>
<CAPTION>
                               Russell 2000               NASDAQ Composite    Craftmade International

<C>                               <C>                          <C>                   <C>
4/16/90                           100.00                       100.00                100.00
1990                              104.06                       105.86                169.96
1991                              103.01                       108.99                112.86
1992                              116.03                       129.06                164.38
1993                              143.58                       161.42                282.83
1994                              147.85                       161.66                255.79
1995                              174.52                       213.75                228.76
1996                              213.30                       271.36                200.43
1997                              243.89                       330.22                228.33
1998                              281.44                       433.88                762.23
</TABLE>


The historical stock price performance of the Company's common stock shown on
the graph above is not necessarily indicative of future stock performance.

The Company has compared its stock price performance with that of the Russell
2000 Index as it does not believe it can reasonably identify a peer group and no
comparable published industry or line-of-business index is available. The
Russell 2000 Index consists of companies with market capitalization similar to
that of the Company; accordingly, the Company believes the Russell 2000 Index is
the best available performance comparison.

Item 6. Selected Financial Data

The selected financial data in the tables below are for the five fiscal years
ended June 30, 1998. The data should be read in conjunction with the financial
statements and notes, which are included elsewhere herein. The amounts listed
below are in thousands (except per share amounts). Diluted earnings per share,
book value per common share and diluted common shares outstanding have been
restated for all years prior to June 30,1998 to reflect the Company's three for
two stock split effective October 31, 1997.

<TABLE>
<CAPTION>
                                                                     For the years ended
                                              -----------------------------------------------------------------
                                               June 30,       June 30,      June 30,      June 30,      June 30,
                                                 1994          1995          1996          1997          1998
                                              --------       --------      --------      --------      --------
<S>                                         <C>             <C>            <C>            <C>          <C>
Selected Operating Results:

Net sales                                   $   32,130       $  34,353     $  36,320      $ 39,523       $ 40,903
Gross profit                                    11,729          12,381        12,884        14,261         16,325
Income before income taxes                       3,688           2,977         2,850         3,310          4,780
Net income                                       2,385           1,903         1,826         2,113          3,046
Diluted earnings per share                         .46             .37           .37           .46            .70
Cash dividends declared
   per common share                         $      .02       $     .04     $     .04      $    .05       $    .08
Diluted common
    shares outstanding                           5,208           5,147         4,884          4,558         4,372
</TABLE>

<TABLE>
<CAPTION>
                                               June 30,      June 30,      June 30,      June 30,      June 30,
                                                 1994          1995          1996          1997          1998
                                              --------       --------      --------      --------      --------
<S>                                          <C>            <C>            <C>            <C>           <C>
Summary Balance Sheet:

Current assets                               $   14,878     $   16,720     $  17,835      $ 20,431      $ 18,973
Current liabilities                               6,444          8,065         8,799        11,487         8,837
Long-term debt                                        -              -         8,519         7,989         6,077
Total assets                                     15,853         17,631        27,996        30,278        28,358
Shareholders' equity                              9,373          9,565        10,633        10,720        13,338
Book value per common share                  $     1.81     $     1.93     $    2.21      $   2.44      $   3.04
</TABLE>

                                      -9-


<PAGE>   12

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

With the exception of historical information, the matters discussed herein
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 the important factors which would cause
actual results to differ materially from those in the forward-looking statements
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 including, but not limited to, Durocraft's
relationship with its major customer, customer acceptance of existing and new
products, pricing pressures due to excess capacity, raw material cost increases,
change of tax rates, change of interest rates, unfavorable economic and
political developments in the Republic of Taiwan, the location of the Company's
principal vendor, declining conditions in the home construction industry,
resolution of the Year 2000 issue, and other uncertainties, all of which are
difficult to predict and many of which are beyond the control of the Company. In
addition, the forward-looking statements do not reflect any potential impact the
acquisition of TSI California ( see "Subsequent Events") may have on the
Company's operations.

Year Ended June 30, 1998 compared to June 30, 1997

Net sales increased to $40,902,587 for the year ended June 30,1998 from
$39,523,383 for the year ended June 30, 1997, representing an increase of
$1,379,204 or 3.5%. This increase in sales was primarily the result of an
increase of approximately $1,850,000 in bathstrip lighting as this product line
gained strong acceptance from the fan division's customer base in fiscal 1998.
Sales from the fan division, excluding bathstrip lighting sales, increased .2%.
The fan division established a very aggressive marketing strategy in fiscal 1998
by retooling several of this division's core products to provide added features
and aesthetics; introducing new, proprietary products that have innovative
designs and features; revising the product mix in order to meet customer and
market demands; and providing a price decrease to this division's customer base
effective March 1998. The Company's management anticipates that this aggressive
marketing strategy, coupled with the positive impact of the bathstrip lighting
product line, will yield strong growth consistent with prior years and will
provide the fan division with a very receptive customer base for future product
expansion. In addition, management does not believe that the Company will be
negatively impacted by unfavorable financial developments in the countries in
which its suppliers operate. The sales increase provided by the fan division was
partially offset by approximately $450,000 in lamp sales to a "seconds" retailer
in fiscal 1997 that did not reoccur in fiscal 1998. In addition, orders from the
lamp division's primary customer have not recovered from an internal
restructuring by that customer in 1997. Although orders to that customer appear
to have stabilized over the last twelve months, this division is continuing its
aggressive strategy of inventory reduction through select "seconds" retailers.
The Company's management originally anticipated that this inventory reduction
could be accomplished by June 30, 1998; however, due to a limited resource of
labor available, the Company's management has reevaluated the time frame and
estimates completion between December 1998 and March 1999. Management will
continue to closely monitor this division and its financial results to determine
the feasibility of continuing this division as a single-customer manufacturer
with limited overhead or dissolving this division. Management currently believes
that the net lamp inventory existing at June 30, 1998 of $1,676,371 can be
liquidated at a small profit.

Gross profit increased to $16,324,637,or 39.9% of net sales, for the year ended
June 30, 1998 from $14,261,203, or 36.1% of net sales, for the year ended June
30, 1997. This increase was primarily attributable to the benefit of price
concessions received from the Company's suppliers located in the Orient,
partially offset by the price decreases the fan division passed on to its
customer base effective March 1998. The Company's management anticipates that
gross margins will stabilize at current levels, provided that the Company
continues to benefit from favorable product costs and increasing customer demand
and that the aggressive inventory reduction of the lamp division does not
adversely affect overall Company margins.

Total selling, general and administrative expenses increased $612,371 to
$10,060,750, or 24.6% of net sales, for the year ended June 30, 1998 from
$9,448,379, or 23.9% of net sales, for the year ended June 30,1997. This
increase was primarily attributable to increases in commissions and certain
other costs directly correlated to the increase in sales, higher transportation
costs and the expensing of certain costs associated with the


                                      -10-
<PAGE>   13

acquisition of TSI California (see "Subsequent Events") and the Company's stock
split. The Company's management anticipates that, in the future, selling,
general and administrative expenses as a percentage of net sales will remain
fairly constant.

Net interest expense decreased $124,169 to $1,231,169 for the year ended June
30, 1998 from $1,355,338 for the year ended June 30, 1997. This decrease was the
result of the Company's utilization of excess cash flow to decrease the
outstanding balance on its line of credit by $3,000,000 and to pay down its
facility note payable by an additional $1,200,000. The Company's management
intends to continue this strategy of debt reduction as excess cash flow is
available.

The provision for income taxes increased to $1,733,221 or 36.3% of income before
income taxes, for the year ended June 30, 1998 from $1,196,821, or 36.2% of
income before income taxes, for the year ended June 30, 1997.

Net income increased to $3,046,444, or diluted earnings per share of $.70 , for
the year ended June 30,1998 from $2,113,136, or diluted earnings per share of
$.46 , for the year ended June 30, 1997. Diluted earnings per share for the year
ended June 30, 1997 retroactively reflects the Company's three-for-two stock
split effective October 31, 1997. This increase in net income was primarily
attributable to the increase in gross margins.

Year Ended June 30, 1997 compared to June 30, 1996

Net sales increased to $39,523,383 for the year ended June 30, 1997 from
$36,320,034 for the year ended June 30, 1996, representing an increase of
$3,203,349 or 8.8%. This increase in sales was primarily the result of a 17.8%
increase in sales from the Company's fan division attributable to the success of
this division's marketing strategy of selective expansion of its distribution
base, an increase of 7% over last year, and new product introductions. This
increase was also supported by sales in fiscal 1997 of approximately $600,000
related to the Company's entrance into the bathstrip lighting market in January
1997. This sales increase was partially offset by a $2.5 million decrease in
lamp sales as orders from the lamp division's primary customer declined due to
an internal restructuring by that customer.

Gross profit increased to $14,261,203, or 36.1% of net sales, for the year ended
June 30, 1997 from $12,884,051, or 35.5% of net sales, for the year ended June
30, 1996. This increase was primarily attributable to the success of the fan
division's higher end product line and the initial benefit of price concessions
received from this division's suppliers located in the Orient received in the
fourth quarter of fiscal 1997.

Total selling, general and administrative expenses increased $472,425 to
$9,448,379, or 23.9% of net sales, for the year ended June 30, 1997 from
$8,975,954, or 24.7% of net sales, for the year ended June 30, 1996. This
increase was primarily attributable to increases in commissions and certain
other costs directly correlated to the increase in sales and to an increase in
property taxes relating to the Company's facility purchased December 1995,
partially offset by the reduction in operating lease expense.

Net interest expense increased $459,407 to $1,355,338 for the year ended June
30, 1997 from $895,931 for the year ended June 30, 1996. This increase was the
result of increases in the average outstanding indebtedness this year over last
primarily related to the Company's growth and treasury stock purchases and
interest incurred relating to the financing of the Company's facility acquired
in December 1995.

The provision for income taxes increased to $1,196,821, or 36.2% of income
before income taxes, for the year ended June 30, 1997 from $1,024,466, or 36.0%
of income before income taxes, for the year ended June 30, 1996.

Net income increased to $2,113,136 for the year ended June 30, 1997 from
$1,825,567 for the year ended June 30, 1996. This increase was primarily
attributable to the increase in sales and gross margins. In addition, the per
share amount also benefitted from treasury stock purchases by reducing the
number of shares outstanding.



                                      -11-
<PAGE>   14

Year Ended June 30, 1996 compared to June 30, 1995

Net sales increased to $36,320,034 for the year ended June 30, 1996 from
$34,352,775 for the year ended June 30, 1995, representing an increase of
$1,967,259 or 5.7%. This increase in sales was primarily attributable to a 9.6%
increase in sales from the Company's fan division as a result of the recovery of
this division's market through the stabilization of new home construction and
the continued success of this division's marketing strategy of selective
expansion of its distribution base and new product introductions. This increase
in sales was partially offset by an 8.3% decrease in lamp sales due to delays in
raw materials delivery. Sales to one of the lamp division's customers
represented approximately 89% of that division's fiscal 1996 net sales.

Gross profit increased to $12,884,051, or 35.5% of sales, for the year ended
June 30, 1996, as compared to $12,380,599, or 36.0% of sales, for the year ended
June 30, 1995. The Company experienced a decrease in gross profit percentage
primarily as a result of increased raw materials cost incurred in the latter
part of fiscal 1995 associated with the manufacture of its products and the
addition of a lower end line of fans to the product mix of the Company's fan
division towards the end of fiscal 1995.

Total selling, general and administrative expenses increased $335,318 to
$8,975,954, or 24.7% of sales, for the year ended June 30, 1996 from $8,640,636,
or 25.2% of sales, for the year ended June 30, 1995. This increase was primarily
attributable to an increase in commissions and certain other costs directly
correlated to the increase in sales and one-time charges in excess of $200,000
related to the acquisition of and relocation to the Company's new facility
completed in December 1995. As a result of this relocation, fiscal 1996 lease
expense declined approximately $310,000 from prior year levels. However, the
decline in this component of selling, general and administrative expenses was
fully offset by increases in depreciation and interest costs also attributable
to the relocation to the new facility.

Net interest expense increased $375,272 to $895,931 for the year ended June 30,
1996 from $520,659 for the year ended June 30, 1995. This increase was primarily
the result of $309,187 in interest incurred relating to the financing of the
Company's newly-acquired facility.

The provision for income taxes decreased to $1,024,466, or 36.0% of income
before income taxes, for the year ended June 30, 1996 from $1,073,551, or 36.1%
of income before income taxes, for the year ended June 30, 1995.

Net income decreased slightly to $1,825,567 for the year ended June 30, 1996
from $1,903,117 for the year ended June 30, 1995. The decrease in net income was
primarily the result of the decrease in the Company's gross profit percentage,
increases in selling, general and administrative expenses and the increase in
interest expense, partially offset by the sales increase.

LIQUIDITY AND CAPITAL RESOURCES

Fiscal year ended June 30, 1998-The Company's cash increased $309,368, from
$615,173 at June 30, 1997 to $924,541 at June 30, 1998. The Company's operating
activities provided cash of $5,596,038 during fiscal 1998 compared to $310,511
during fiscal 1997. This increase in cash flows was primarily attributable to a
$1,417,052 decrease in inventory as a result of the Company's management
reevaluating required stocking needs and the continued liquidation of the lamp
division's inventory, supported by improved operating results.

In order to meet its own delivery policies and to ensure that it has a
sufficient allotment of goods on hand from its overseas suppliers, the Company
maintains a significant level of inventory. Management believes that the Company
has sufficient amounts of working capital, trade credit, and availability under
its bank line to fund this level of inventory.

Cash used for investing activities of $94,994 related to the purchase of
warehouse equipment and computer upgrades.

                                      -12-
<PAGE>   15

Cash used for financing activities of $5,191,676 was primarily the result of the
paydown of $3,000,000 on the Company's line of credit, principal payments of
$1,763,181 made towards the facility note, the repurchase of 32,000 shares of
the Company's common stock in connection with the Company's stock repurchase
plan at an aggregate cost of $244,000 and cash dividends of $320,120, partially
offset by proceeds of $135,625 from the exercise of employee stock options.

At June 30, 1998, subject to continued compliance with certain covenants and
restrictions, the Company had $12 million available on its line of credit, of
which $7 million had been utilized. On July 1, 1998, in connection with the TSI
California acquisition (see "Subsequent Events"), the Company negotiated an
increase in the availability of its line of credit to $14 million. The Company's
management believes that the increased availability under its current line of
credit, combined with cash flows from operations, is adequate to fund the cash
portion of the TSI California acquisition, repay TSI California's $900,000 line
of credit, fund the Company's current operating needs, make annual payments
under the facility note payable approximating $1,400,000, fund the cost of
ensuring that the Company's systems are Year 2000 compliant, as well as fund its
projected growth over the next twelve months. In addition, the Company has begun
to utilize excess cash flow to reduce outstanding indebtedness, decreasing such
indebtedness by an additional $4,200,000 during the year ended June 30, 1998. It
is management's intention to continue this strategy of debt reduction as excess
cash flow is made available.

At June 30, 1998, $6,755,950 remained outstanding under the twelve year note
payable for the Company's 378,000 square foot operating facility. The Company
leased 80,000 square feet of this facility to TSI California at a lease rate of
$20,000 per month. The Company's management believes that this facility will be
sufficient for its purposes for the foreseeable future.

The Company's ceiling fan manufacturer has provided the Company with a
$1,000,000 credit facility, pursuant to which it will manufacture and ship
ceiling fans prior to receipt of payment from the Company. Accordingly, payment
can be deferred until delivery of such products. At present levels, such credit
facility is equivalent to approximately one month's supply of ceiling fans and
represents a supplier commitment which, in the opinion of the Company, is
unusual for the industry. This manufacturer is not required to provide this
credit facility under its agreement with the Company, and it may discontinue
this arrangement at any time.

The Company has discontinued its stock repurchase program. Pursuant to this
program, the Company had purchased a total of 601,269 shares of the Company's
common stock prior to the Company's three-for-two stock split effective October
31, 1997, at an aggregate cost of $4,576,623.

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. This 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. The Company has purchased an
upgrade for its current computer software to resolve this issue, the cost of
which was approximately $12,000, and plans to implement and test this upgrade
within the next six months. The Company is currently investigating all systems
that could potentially be affected by this issue, including facility systems,
telephone hardware and software, out- sourced services , suppliers and
customers. Within the next twelve months, the Company plans to upgrade and test
systems, as needed, that will already be Year 2000 compliant. At this time, the
Company's management can not estimate the cost of any systems upgrades that
might be required. There can be no assurances that the Company's suppliers,
vendors and customers will address and satisfactorily resolve their Year 2000
issues in a timely manner such that the Company's results of operations,
financial position and cash flow would not be materially adversely affected.

Fiscal year ended June 30, 1997- The Company's cash decreased $47,884, from
$663,057 at June 30, 1996 to $615,173 at June 30, 1997. The Company's operating
activities provided cash of $310,511 during fiscal 1997 compared to $1,136,852
during fiscal 1996. The decrease in cash flows was primarily attributable to


                                      -13-
<PAGE>   16

a $2,244,717 increase in inventory to meet anticipated sales growth and to build
up adequate stocking levels for the Company's new bathstrip lighting product
line, partially offset by improved operating results.

Cash used for investing activities of $143,508 related to the purchase of
warehouse equipment.

Cash used for financing activities of $214,887 was primarily the result of the
repurchase of 270,769 shares of the Company's stock in connection with the
Company's stock repurchase plan at an aggregate cost of $1,875,350, cash
dividends of $150,881 and principal payments of $488,656 made towards the
facility note, partially offset by $2,300,000 in additional borrowing from the
Company's line of credit.

Fiscal year ended June 30, 1996 - The Company's cash increased $394,354, from
$268,703 at June 30, 1995 to $663,057 at June 30, 1996. The Company's operating
activities provided cash of $1,136,852 during fiscal 1996 compared to $364,186
during fiscal 1995. The increase in cash provided by operating activities is
primarily attributable to net income and a fairly constant level of inventory
during 1996 compared to an approximate $1,400,000 increase during 1995. This
increase was partially offset by increases in accounts receivable of $821,448
relating to increased sales as a result of the stabilization of the new home
construction market.

Cash used by investing activities of $9,152,822 related to the purchase of the
Company's new facility in December 1995 and purchases of warehouse equipment,
computer equipment and general office furniture necessary to facilitate
relocation to this new facility.

Cash provided by financing activities of $8,410,324 was primarily from
$9,200,000 in financing obtained for the new facility, less principal payments
of $192,213, and $220,000 in additional borrowings from the Company's line of
credit, partially offset by the repurchase of 106,500 shares of the Company's
Common Stock at an aggregate cost of $699,955 and dividends paid totalling
$129,653.


ACCOUNTING CHANGES

Earnings Per Share - FAS 128

In February 1997, the Financial Accounting Standards Board issued FAS 128,
"Earnings Per Share." This statement requires interim and annual presentation of
"basic" and "diluted" earnings per share (EPS) by all entities that have issued
common stock or potential common stock if those securities trade in a public
market. The objective of basic EPS is to measure the performance of an entity
over the reporting period. The objective of diluted EPS is to measure the
performance of an entity over the reporting period while giving effect to all
potentially dilutive common shares that were outstanding during the period. This
statement also requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted EPS
computation. The Company adopted this statement in the second quarter ended
December 31, 1997 at which time all prior period EPS data presented were
restated to conform with the provisions of this statement. Such adoption had no
impact on the Company's presentation of earnings per share.



                                      -14-
<PAGE>   17



INFLATION

Generally inflation has not had, and the Company does not expect it to have, a
material impact upon operating results. However, there can be no assurance that
the Company's business will not be affected by inflation in the future.

SUBSEQUENT EVENTS

Effective July 1,1998, the Company entered into an agreement and plan of merger
with Trade Source International Inc., a California corporation (TSI California)
engaged in the wholesale distribution of outdoor lighting fixtures to mass
merchandisers. As a result, the Company acquired TSI California from its
existing shareholders and merged it into the Company's wholly-owned subsidiary,
Trade Source International, Inc., a Delaware corporation (TSI Delaware). The
total purchase price was approximately $11 million paid in a combination of
approximately $3.6 million cash and approximately 656,000 shares of Craftmade's
common stock that had previously been repurchased by the Company related to the
Company's stock repurchase program. This transaction will be accounted for under
the purchase method of accounting, and the results of operations of TSI Delaware
will be consolidated subsequent to July 1, 1998. The excess of the purchase
price over the estimated fair value of the acquired net assets, which
approximates $5.6 million, will be recorded as goodwill and amortized over 15
years.

The unaudited pro forma combined condensed balance sheet of the Company and TSI
- Delaware as of June 30, 1998 after giving effect to certain pro forma
adjustments is as follows:

<TABLE>
<CAPTION>
ASSETS

<S>                                                                  <C>
Current Assets                                                       $ 29,155,431
Property and Equipment, Net                                             9,602,393
Goodwill                                                                5,593,998
Other                                                                     239,326
                                                                     ------------
                                                                     $ 44,591,148
                                                                     ============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities                                                  $ 17,691,762
Other Non-Current Liabilities                                           6,182,752
Shareholders' Equity                                                   20,716,634
                                                                     ------------
                                                                     $ 44,591,148
                                                                     ============
</TABLE>

The unaudited pro forma combined results of operations of the Company and TSI -
Delaware for the year ended June 30, 1998 after giving effect to certain pro
forma adjustments are as follows

<TABLE>
<S>                                                                  <C>
Net Sales                                                            $ 67,755,665
                                                                     ============
Net Income                                                             $3,753,472
                                                                     ============
Earnings per share
    Basic and Diluted                                                $        .75
                                                                     ============

Weighted average shares outstanding
     Basic                                                              5,018,625
                                                                     ============
     Diluted                                                            5,027,504
                                                                     ============
</TABLE>

In connection with this transaction, on July 1, 1998 the Company negotiated an
increase in the availability of its line of credit to $14 million. Proceeds of
the line were used to facilitate the cash portion of the acquisition and to pay
TSI California's existing line of credit of approximately $900,000.




                                      -15-
<PAGE>   18

Item 7A. Quantitative and Qualitative Disclosure about Market Risk

                   Not Applicable

Item 8. Financial Statements and Supplementary Data

The financial statements and supplementary data are included under Item 14(a)(1)
and (2) of this report.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

                  Not applicable.





                                      -16-
<PAGE>   19





                                    PART III

Item 10. Directors and Executive Officers of the Registrant

The information relating to the Company's directors and nominees for election as
directors of the Company is incorporated herein by reference from the Company's
Proxy Statement for its 1998 Annual Meeting of Shareholders, specifically the
discussion under the heading "Election of Directors." It is currently
anticipated that the Proxy Statement will be publicly available and mailed to
shareholders in September 1998.

Item 11. Executive Compensation

The discussion under "Remuneration of Directors and Officers and Certain
Transactions" in the Company's Proxy Statement is incorporated herein by
reference.


Item 12. Security Ownership of Certain Beneficial Owners and Management

The discussion under "Voting and Principal Shareholders" in the Company's Proxy
Statement is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

Not applicable.




                                      -17-
<PAGE>   20
                                     PART IV

Item 14. Exhibits, Financial Statements, Financial Statement Schedules and
Reports on Form 8-K

   (a) The following documents are filed as a part of this report:

         1.  Financial Statements - The financial statements listed in the
             "Index to Consolidated Financial Statements" described at F-1.

         2. Exhibits - Refer to (b) below.

         Financial Statement Schedules have been omitted since they are either
         not required, not applicable or the required information is shown in
         the financial statements or related notes.

   (b)   Exhibits

         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 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 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.

         21     - Subsidiaries of the Registrant.

         27.1   - Financial Data Schedule.

         27.2   - Restated Financial Data Schedules. 


                                      -18-
<PAGE>   21




                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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, on September 14, 1998.

International, Inc.



By:  /s/ James Ridings
     ------------------------------------------
     James Ridings, Chairman of the Board,
     President and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.



<TABLE>
<CAPTION>
Signatures                                  Capacity                                    Date
----------                                  --------                                    ----
<S>                                        <C>                                          <C>
 /s/ James Ridings                          Chairman of the Board, President,           September 14, 1998
---------------------------                 Chief Executive Officer and
 James Ridings                              Director (Principal Executive
                                            Officer)
                                                                          



/s/  Clifford Crimmings                     Vice President of Sales and                 September 14, 1998
---------------------------                 Director
 Clifford Crimmings                                   




/s/  Ken Cancienne                          Chief Financial Officer, Principal          September 14, 1998
---------------------------                 Accounting Officer and Director
 Ken Cancienne                                                               


/s/  Jerry E. Kimmel                        Director                                    September 14, 1998
---------------------------
 Jerry E. Kimmel


/s/ A. Paul Knuckley                        Director                                    September 14, 1998
---------------------------
A. Paul Knuckley

</TABLE>


                                      -19-
<PAGE>   22
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                                  PAGE
<S>                                                                             <C>
FINANCIAL STATEMENTS:
   Report of Independent Accountants                                              F-2
   Consolidated Statements of Income                                              F-3
   Consolidated Balance Sheets                                                    F-4
   Consolidated Statements of Cash Flows                                          F-6
   Consolidated Statements of Changes in Shareholders' Equity                     F-8
   Notes to Consolidated Financial Statements                                     F-9
</TABLE>



   Financial statement schedules have been omitted since they are either not
   required, not applicable, or the required information is shown in the
   financial statements or related notes.









                                      F-1
<PAGE>   23

                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Shareholders
    of Craftmade International, Inc.


In our opinion, the consolidated financial statements listed in the index
appearing on page F-1 present fairly, in all material respects, the financial
position of Craftmade International, Inc. and its wholly-owned subsidiaries (the
"Company") at June 30, 1998 and 1997, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1998,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.


/s/ PricewaterhouseCoopers  LLP


Fort Worth, Texas
August 19, 1998



                                      F-2
<PAGE>   24


               CRAFTMADE INTERNATIONAL, INC. AND ITS SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME




<TABLE>
<CAPTION>
                                                                   FOR THE YEARS ENDED
                                                        JUNE 30,        JUNE 30,          JUNE 30,
                                                         1996             1997             1998
                                                      ------------     ------------     ------------


<S>                                                   <C>              <C>              <C>                           
Net sales                                             $ 36,320,034     $ 39,523,383     $ 40,902,587 
Cost of goods sold                                      23,435,983       25,262,180       24,577,950
                                                      ------------     ------------     ------------
Gross profit                                            12,884,051       14,261,203       16,324,637
Selling, general and administrative
    expenses                                             8,975,954        9,448,379       10,060,750
Depreciation and amortization                              282,133          387,529          493,198
                                                      ------------     ------------     ------------
Operating  profit                                        3,625,964        4,425,295        5,770,689
Other (income) expense:
    Interest expense                                       895,931        1,355,338        1,231,169
    Other, net                                            (120,000)        (240,000)        (240,145)
                                                      ------------     ------------     ------------
Income before income taxes                               2,850,033        3,309,957        4,779,665
Provision for income taxes                               1,024,466        1,196,821        1,733,221
                                                      ------------     ------------     ------------
         Net income                                   $  1,825,567     $  2,113,136     $  3,046,444
                                                      ============     ============     ============
Basic and diluted earnings per common share                  $. 37     $        .46     $        .70
                                                      ============     ============     ============
</TABLE>






                     The accompanying notes are an integral
                part of these consolidated financial statements.




                                      F-3
<PAGE>   25



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

<TABLE>
<CAPTION>
                                                            JUNE 30,        JUNE 30,
                                                             1997             1998
                                                         ------------     ------------
<S>                                                      <C>              <C>         
Current assets:
   Cash                                                  $    615,173     $    924,541
   Accounts receivable - trade, net of allowance
   of $275,000 and $200,000, respectively                   7,599,775        7,562,404
   Inventory                                               10,925,342        9,508,290
   Deferred income taxes                                      544,160          475,731
   Prepaid expenses and other current assets                  746,343          502,432
                                                         ------------     ------------

Total current assets                                       20,430,793       18,973,398
                                                         ------------     ------------

Property and equipment, at cost:
Land                                                        1,534,894        1,534,894
Building                                                    7,714,033        7,726,213
Office furniture and equipment                              1,177,377        1,257,891
Leasehold improvements                                         58,739           61,039
                                                         ------------     ------------
                                                           10,485,043       10,580,037
Less:  accumulated depreciation                              (953,640)      (1,273,719)
                                                         ------------     ------------

Total property and equipment, net                           9,531,403        9,306,318

Goodwill, net of accumulated amortization
  of $398,210 and $569,781, respectively                      171,571             --
Other assets                                                  143,913           78,044
                                                         ------------     ------------
Total other assets                                          9,846,887        9,384,362
                                                         ------------     ------------

                                                         $ 30,277,680     $ 28,357,760
                                                         ============     ============
</TABLE>



                     The accompanying notes are an integral
                part of these consolidated financial statements.




                                      F-4
<PAGE>   26




               CRAFTMADE INTERNATIONAL, INC. AND ITS SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
                      LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                  JUNE 30,         JUNE 30,
                                                                    1997            1998
                                                                ------------     ------------
<S>                                                             <C>              <C>         
   Current liabilities:
   Note payable, facility - current portion                     $    529,872     $    679,369
   Revolving line of credit                                       10,000,000        7,000,000
   Accounts and commissions payable                                  510,007          497,806
   Income taxes payable                                              204,191          366,997
   Accrued liabilities                                               243,410          293,151
                                                                ------------     ------------
       Total current liabilities                                  11,487,480        8,837,323

Other non-current liabilities:
  Deferred income taxes                                               81,205          106,171
  Note payable, facility - long term portion                       7,989,259        6,076,581
                                                                ------------     ------------


           Total liabilities                                      19,557,944       15,020,075
                                                                ------------     ------------

Shareholders' equity:
   Series A cumulative, convertible, callable preferred
     stock, $1.00 par value, 2,000,000 shares authorized;
     32,000 shares issued                                             32,000           32,000
   Common stock, $.01 par value, 15,000,000 shares
      authorized, 4,110,683 and 5,197,025 shares issued,
      respectively                                                    41,107           61,970
   Additional paid-in capital                                      7,095,571        7,210,333
   Retained Earnings                                              11,186,507       13,912,831
                                                                ------------     ------------
                                                                  18,355,185       21,217,134
   Less: treasury stock, 1,178,683 and 1,616,025 common
     shares at cost, respectively,
     and  32,000 preferred shares at cost                         (7,635,449)      (7,879,449)
                                                                ------------     ------------
                                                                  10,719,736       13,337,685
                                                                ------------     ------------
 Commitments and contingencies
   (Notes 9 and 10)
                                                                $ 30,277,680     $ 28,357,760
                                                                ============     ============
</TABLE>



                     The accompanying notes are an integral
                part of these consolidated financial statements.




                                      F-5
<PAGE>   27


               CRAFTMADE INTERNATIONAL, INC. AND ITS SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                            FOR THE YEARS ENDED
                                                                -------------------------------------------
                                                                   JUNE 30,        JUNE 30,       JUNE 30,
                                                                    1996            1997            1998
                                                                -----------     -----------     -----------
<S>                                                             <C>             <C>             <C>        
Cash flows from operating activities:
Net income                                                      $ 1,825,567     $ 2,113,136     $ 3,046,444
  Adjustments to reconcile net income to net
       cash provided by  operating activities:
         Depreciation and amortization                              282,133         387,529         493,198
  Change in assets and liabilities
     providing (using) cash:
     Accounts receivable                                           (821,448)       (360,318)         37,371
     Inventory                                                     (101,955)     (2,244,717)      1,417,052
     Prepaid expenses and other assets                             (217,412)        179,662         308,232
        Accounts and commissions payable                            118,936          44,768         (12,201)
     Income taxes payable                                          (105,448)        204,191         162,806
     DEFERRED INCOME TAXES                                           93,987        (112,376)         93,395
     Accrued liabilities                                             62,492          98,636          49,741
                                                                -----------     -----------     -----------
Net cash provided by operating activities                         1,136,852         310,511       5,596,038
                                                                -----------     -----------     -----------

Cash flows used for investing activities:
     Additions to property and equipment                         (9,152,822)       (143,508)        (94,994)
                                                                -----------     -----------     -----------
Cash flows from financing activities:
  Proceeds from note payable, facility                            9,200,000            --              --
  Principal payments for note payable, facility                    (192,808)       (488,656)     (1,763,181)
  Net (payments to) proceeds from  line of credit                   220,000       2,300,000      (3,000,000)
  STOCK REPURCHASE                                                 (699,955)     (1,875,350)       (244,000)
  Cash dividends                                                   (129,653)       (150,881)       (320,120)
  Proceeds from exercise of employee stock options                   12,740            --           135,625
                                                                -----------     -----------     -----------
Net cash provided by (used for) financing activities              8,410,324        (214,887)     (5,191,676)
                                                                -----------     -----------     -----------

Net increase (decrease) in cash                                     394,354         (47,884)        309,368
Cash at beginning of year                                           268,703         663,057         615,173
                                                                -----------     -----------     -----------
Cash at end of year                                             $   663,057     $   615,173     $   924,541
                                                                ===========     ===========     ===========
</TABLE>



                     The accompanying notes are an integral
                part of these consolidated financial statements.




                                      F-6
<PAGE>   28



               CRAFTMADE INTERNATIONAL, INC. AND ITS SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


Supplemental disclosures of cash flow 
 information:

<TABLE>
<CAPTION>
                                                      FOR THE YEARS ENDED
                                            --------------------------------------
                                             JUNE 30,       JUNE 30,     JUNE 30,
                                               1996          1997          1998
                                            ----------    ----------    ----------
<S>                                         <C>           <C>           <C>       
Cash paid during the year for:
   Interest                                 $  895,931    $1,355,338    $1,231,169
                                            ==========    ==========    ==========
   Income taxes                             $1,016,346    $1,097,170    $1,440,063
                                            ==========    ==========    ==========
</TABLE>









                     The accompanying notes are an integral
                part of these consolidated financial statements.




                                      F-7
<PAGE>   29
               CRAFTMADE INTERNATIONAL INC. AND ITS SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                     FOR THE THREE YEARS ENDED JUNE 30, 1998


<TABLE>
<CAPTION>
                                                     Voting                
                                                   Common Stock              Series A       Additional
                                            ----------------------------     Preferred       Paid-in           Retained
                                              Shares          Amount           Stock          Capital           Earnings
                                            ------------    ------------    ------------    ------------     ------------

<S>                                            <C>          <C>             <C>             <C>              <C>             
Balance as of June 30, 1995                    4,092,483    $     40,925    $     32,000    $  7,024,265     $  7,528,338    

Exercise of employee
     stock options                                18,200             182            --            71,306             --      
Stock repurchase                                    --              --              --              --               --      
Cash dividends                                      --              --              --              --           (129,653)   
Net income for the year ended
     June 30, 1996                                  --              --              --              --          1,825,567    
                                            ------------    ------------    ------------    ------------     ------------    

Balance as of June 30, 1996                    4,110,683          41,107          32,000       7,095,571        9,224,252    

Stock repurchase                                    --              --              --              --               --      
Cash dividends                                      --              --              --              --           (150,881)   
Net income for the year ended
     June 30, 1997                                  --              --              --              --          2,113,136    
                                            ------------    ------------    ------------    ------------     ------------    

Balance as of June 30, 1997                    4,110,683          41,107          32,000       7,095,571       11,186,507    

Stock repurchase                                    --              --              --              --               --      
Exercise of employee stock options                31,000             310            --           135,315             --      
Cash dividends                                      --              --              --              --           (320,120)   
Stock split                                    2,055,342          20,553            --           (20,553)            --      
Net income for year ended
      June 30, 1998                                 --              --              --              --          3,046,444    
                                            ------------    ------------    ------------    ------------     ------------    
Balance as of June 30, 1998                    6,197,025    $     61,970    $     32,000    $  7,210,333     $ 13,912,831    
                                            ============    ============    ============    ============     ============    


<CAPTION>



                                                      Treasury Stock
                                               ----------------------------       Total
                                                 Shares          Amount        ------------
                                               ------------    ------------     

<S>                                               <C>        <C>              <C>         
Balance as of June 30, 1995                       833,414    ($ 5,060,144)    $  9,565,384

Exercise of employee
     stock options                                   --              --             71,488
Stock repurchase                                  106,500        (699,955)        (699,955)
Cash dividends                                       --              --           (129,653)
Net income for the year ended
     June 30, 1996                                   --              --          1,825,567
                                             ------------    ------------     ------------

Balance as of June 30, 1996                       939,914      (5,760,099)      10,632,831

Stock repurchase                                  270,769      (1,875,350)      (1,875,350)
Cash dividends                                       --              --           (150,881)
Net income for the year ended
     June 30, 1997                                   --              --          2,113,136
                                             ------------    ------------     ------------

Balance as of June 30, 1997                     1,210,683      (7,635,449)      10,719,736

Stock repurchase                                   32,000        (244,000)        (244,000)
Exercise of employee stock options                   --              --            135,625
Cash dividends                                       --              --           (320,120)
Stock split                                       605,342            --               --
Net income for year ended
      June 30, 1998                                  --              --          3,046,444
                                             ------------    ------------     ------------
Balance as of June 30, 1998                     1,848,025    ($ 7,879,449)    $ 13,337,685
                                             ============    ============     ============
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.


                                      F-8
<PAGE>   30




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

NOTE 1 - ORGANIZATION AND NATURE OF THE COMPANY

Craftmade International, Inc. ("Craftmade") was incorporated in the state of
Texas in July 1985 and reincorporated in the state of Delaware in December 1991.

Craftmade is principally engaged in the design, distribution and marketing of
ceiling fans, light kits, bathstrip lighting and related accessories to a
nationwide network of lighting showrooms and electrical wholesalers specializing
in sales to the remodeling and new home construction markets, as well as the
restaurant and commercial building market. Primarily all of the fans and
accessories are provided to Craftmade through one supplier. In addition to the
principal business of ceiling fans, Durocraft International, Inc. ("Durocraft"),
a wholly-owned subsidiary of Craftmade, has two divisions. The Durocraft Design
Manufacturing division assembles build-to-order floor and table lamps primarily
for sale to a mid-price retailer with locations in the United States and Canada.
The other division, Global Electronics, Inc., imports and distributes a variety
of cables and components for telephone and communications industries.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION - The consolidated financial statements of the Company
include the accounts of Craftmade International, Inc. and its wholly-owned
subsidiaries. All intercompany accounts and transactions have been eliminated.

CONCENTRATION OF CREDIT RISK - Financial instruments which potentially subject
the Company to concentrations of credit risk consist primarily of trade
receivables. Substantially all of the fan division's customers are lighting
showrooms; however, credit risk is limited due to this division's large number
of customers and their dispersion across many different geographic locations. As
of June 30, 1998, the fan division had no significant concentration of credit
risk. The lamp division's customer base consists primarily of one mid-price
retailer with locations in the United States and Canada.

INVENTORIES - Inventories are stated at the lower of cost or market, with cost
being determined using the average cost method which approximates the first-in,
first-out (FIFO) method. The cost of inventory includes freight-in and duties on
imported goods.

PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost.
Depreciation is determined using the straight-line method over the estimated
useful lives of the property and equipment, which range from three to 40 years.

Maintenance and repairs are charged to expense as incurred; renewals and
betterments are charged to appropriate property or equipment accounts. Upon sale
or retirement of depreciable assets, the cost and related accumulated
depreciation is removed from the accounts, and the resulting gain or loss is
included in the results of operations in the period of the sale or retirement.

GOODWILL - Goodwill related to the Company's acquisition of DMI Products, Inc.
in 1990 was being amortized using the straight-line method over 10 years.
Accordingly, goodwill amortization has been recorded in the accompanying
consolidated statements of income of $55,643 for each of the years ended June
30, 1996 and 1997. During the year ended June 30, 1998, the Company determined
that 



                                      F-9
<PAGE>   31

events had made recovery of the goodwill unlikely, pursuant to its impairment
policy of long-lived assets described below, and the remaining balance of
$171,571 was expensed.

IMPAIRMENT OF LONG-LIVED ASSETS - The Company reviews potential impairments of
long-lived assets, certain identifiable intangibles, and associated goodwill on
an exception basis, when there is evidence that events or changes in
circumstances have made recovery of an asset's carrying value unlikely. An
impairment loss is recognized if the sum of the expected future cash flows
undiscounted and before interest from the use of the asset is less than the net
book value of the asset. Generally, the amount of the impairment loss is
measured as the difference between the net book value of the assets and the
estimated fair value.

ADVERTISING COST - The Company's advertising expenditures are expensed in the
period the advertising first occurs. Advertising expense for the fiscal years
ended June 30, 1996, 1997, and 1998 was $338,744, $471,258, and $577,842,
respectively.

INCOME TAXES - The Company accounts for income taxes under an asset and
liability approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. In estimating
future tax consequences, all expected future events other than enactments of
changes in the tax law or rates are considered.

STOCK-BASED COMPENSATION - Effective July 1, 1996, the Company adopted the
disclosure only provisions of FAS 123, "Accounting for Stock-Based
Compensation". The Company continues to measure compensation cost for those
plans using the intrinsic value based method of accounting as prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees".

EARNINGS PER COMMON SHARE AND STOCK SPLIT - Earnings per common share are
computed by dividing net income by the weighted average number of shares of
common stock outstanding during each period after giving effect to the
three-for-two stock split effected in the form of a 50% stock dividend declared
by the Board of Directors on September 26, 1997 and all potentially dilutive
common shares resulting from stock options. All earnings per share have been
given retroactive effect, reflecting the stock split in the consolidated
financial statements.

In February 1997, the Financial Accounting Standards Board issued FAS 128,
"Earnings Per Share." This statement requires interim and annual presentation of
"basic" and "diluted" earnings per share (EPS) by all entities that have issued
common stock or potential common stock if those securities trade in a public
market. The objective of basic EPS is to measure the performance of an entity
over the reporting period. The objective of diluted EPS is to measure the
performance of an entity over the reporting period while giving effect to all
potentially dilutive common shares that were outstanding during the period. This
statement also requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted EPS
computation. The Company adopted this statement in the second quarter ended
December 31, 1997, at which time all prior period EPS data presented was
restated to conform with the provisions of this statement.

PERVASIVENESS OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the 



                                      F-10
<PAGE>   32

date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.


NOTE 3 - REVOLVING LINE OF CREDIT

At June 30, 1998, the Company has a $12 million line of credit with a financial
institution at an interest rate of LIBOR plus 1.25% (6.9375% at June 30, 1998).
The line of credit is due on demand; however, if no demand is made, it is
scheduled to mature November 30, 1999. The line of credit contains certain
financial covenants, which include consolidated debt to consolidated tangible
net worth, funded debt of EBDIT ratio and capital expenditures and restricts the
Company's payment of quarterly dividends to 40% of the Company's net profit
before taxes, of which the Company is in compliance at June 30, 1998. This line
of credit is secured by inventory, accounts receivable and equipment.

In connection with the transaction described in Note 13-Subsequent Events, the
Company negotiated an increase in the availability of its line of credit to $14
million.

NOTE 4 - NOTE PAYABLE, FACILITY

On December 21, 1995 the Company obtained a $9,200,000 recourse term loan to
finance the purchase of its new facility. The loan bears interest at 8.125% and
is payable in equal monthly installments of principal and interest of $100,280
until it matures on January 1, 2008. The loan is secured by the building and
land.

Scheduled maturities of the facility note payable are as follows:

<TABLE>
<S>                                   <C>       
                1999                  $  679,369
                2000                     736,670
                2001                     798,805
                2002                     866,179
                2003                     939,238
            Thereafter                 2,735,689
                                      ----------
                                      $6,755,950
                                      ==========  
</TABLE>





                                      F-11
<PAGE>   33



NOTE 5 - INCOME TAXES

Components of the provision for income taxes for the years ended June 30, 1996,
1997 and 1998 consist of the following:

<TABLE>
<CAPTION>
                                                          1996           1997            1998
                                                      -----------    -----------     -----------
<S>                                                   <C>            <C>             <C>        
Current Expense:
         Federal                                      $   836,983    $ 1,268,440     $ 1,572,541
         State                                             33,760         40,757          67,285
         Charge in Lieu of Income Taxes Payable            39,638           --              --
                                                      -----------    -----------     -----------
Total Current Expense                                     910,381      1,309,197      1 ,639,826
                                                      -----------    -----------     -----------

Total Deferred (Benefit) Expense                          114,085       (112,376)         93,395
                                                      -----------    -----------     -----------
Total Provision                                       $ 1,024,466    $ 1,196,821     $ 1,733,221
                                                      ===========    ===========     ===========
</TABLE>

Deferred taxes are provided for temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities. The
temporary differences that give rise to deferred tax assets and liabilities at
June 30, 1996, 1997 and 1998 are as follows:


<TABLE>
<CAPTION>
                                                           1996            1997           1998
                                                      -----------     -----------    -----------
<S>                                                   <C>             <C>            <C>        
Inventory                                             $   322,203     $   401,151    $   312,597
Freight reserves                                           55,760          93,500         68,000
Other                                                      25,345          57,261        102,886
                                                      -----------     -----------    -----------
Total deferred tax assets                                 403,308         551,912        483,483
                                                      -----------     -----------    -----------
Total deferred tax liabilities - depreciation             (44,977)        (81,205)      (106,171)
                                                      -----------     -----------    -----------
Deferred tax assets valuation allowance                      --              --             --
                                                      -----------     -----------    -----------
                                                      $   358,331     $   470,707    $   377,312
                                                      ===========     ===========    ===========
</TABLE>

The differences between the Company's effective tax rate and the federal
statutory rate of 34% for the years ended June 30, 1996, 1997 and 1998 are as
follows:

<TABLE>
<CAPTION>
                                                          1996           1997           1998
                                                      -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>        
Tax at the statutory corporate rate                   $   969,011    $ 1,125,385    $ 1,625,086
State income taxes, net of federal benefit                 22,282         26,900         44,408
Other                                                      33,173         44,536         63,727
                                                      -----------    -----------    -----------
   Provision for income taxes                         $ 1,024,466    $ 1,196,821    $ 1,733,221
                                                      ===========    ===========    ===========

      Effective tax rate                                       36%            36%            36%
                                                      ===========    ===========    ===========
</TABLE>





                                      F-12
<PAGE>   34

NOTE 6 - SHAREHOLDERS' EQUITY

EMPLOYEE STOCK OPTION PLANS

On December 15, 1989, the Company granted to five key employees, including the
President, options to purchase an aggregate of 200,000 shares of common stock of
the Company at $.70 per share. Under the terms of the grant, the right to
exercise such options fully vested in fiscal 1994. All of these options were
exercised by June 30, 1996.

On December 31, 1992, the Company granted to two additional key employees
options to purchase an aggregate of 45,000 shares of common stock of the Company
at $4.375 per share, the average market value of common stock at date of grant.
The option price and aggregate shares have been adjusted to reflect the
Company's three-for-two stock split effective October 31, 1997. Under the terms
of the grant, the right to exercise such options fully vested in fiscal 1994,
provided such individuals remained in the employ of the Company.

The options are exercisable for a five-year period subsequent to vesting, except
that following departure from the Company, exercisable options that have accrued
must be exercised within three months of termination of employment. The exercise
period is accelerated in the event of death, disability or early retirement.

A summary of outstanding options are as follows:

<TABLE>
<CAPTION>
                                                   NUMBER OF SHARES
                                       ----------------------------------------
                                          1989           1992
                                          PLAN           PLAN           TOTAL
                                       ----------     ----------     ----------
<S>                                    <C>            <C>            <C>   
Outstanding at June 30, 1995               18,200         30,000         48,200
Exercised                                 (18,200)          --          (18,200)
                                       ----------     ----------     ----------
Outstanding at June 30, 1996                 --           30,000         30,000
Exercised                                    --             --             --
                                       ----------     ----------     ----------
Outstanding at June 30, 1997                 --           30,000         30,000
Effect of stock split                        --           15,000         15,000
Exercised                                    --          (31,000)       (31,000)
                                       ----------     ----------     ----------
Outstanding at June 30, 1998                 --           14,000         14,000
                                       ==========     ==========     ==========
Exercisable at June 30, 1998                 --           14,000         14,000
                                       ==========     ==========     ==========

Price range at June 30, 1998                          $    4.375
                                                      ==========
</TABLE>

STOCK REPURCHASE

On January 27, 1995, and as subsequently amended, the Company's Board of
Directors authorized the Company's management to repurchase up to 1,200,000
shares of the Company's outstanding common stock. During the years ended June
30, 1996, 1997 and 1998, the Company acquired 106,500, 270,769 and 32,000
shares, respectively, of its common stock related to this repurchase program at
an aggregate cost of $699,955, $1,875,350, and $244,000, respectively. These
repurchased shares are reflected as treasury stock on the accompanying
consolidated balance sheets. On September 26, 1997, the Company's Board of
Directors elected to discontinue the stock repurchase plan.



                                      F-13
<PAGE>   35

NOTE 7 - EARNINGS PER SHARE

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


<TABLE>
<CAPTION>
                                         FOR THE YEAR ENDED   FOR THE YEAR ENDED  FOR THE YEAR ENDED
                                            JUNE 30,1996        JUNE 30, 1997       JUNE 30, 1998
                                            ------------        -------------       -------------
<S>                                          <C>                 <C>                 <C>       
Basic and Diluted EPS:

Numerator: Net Income                        $1,825,567          $2,113,136          $3,046,444
                                             ----------          ----------          ----------

Basic Denominator:
Common Shares Outstanding                     4,880,876           4,556,164           4,362,718
                                             ----------          ----------          ----------

Basic EPS:                                   $      .37          $      .46          $      .70
                                             ==========          ==========          ==========

Diluted Denominator:
Common Shares Outstanding                     4,880,876           4,556,164           4,362,718
Options                                           2,700               2,318               8,879
                                             ----------          ----------          ----------
  Total Shares                                4,883,576           4,558,482           4,371,597
                                             ----------          ----------          ----------
Diluted EPS:                                 $      .37          $      .46          $      .70
                                             ==========          ==========          ==========
</TABLE>




The treasury stock method is used to determine the dilutive potential of common
shares outstanding related to stock options. Options which, based on their
exercise price, would be anti-dilutive are not considered in the treasury stock
method calculation. There have been no options excluded from the EPS
calculations above due to their anti-dilutive nature.

NOTE 8 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include cash, receivables, accounts and
commissions payable, accrued liabilities and amounts outstanding under various
debt agreements. Management believes the fair values of these instruments
approximate the related carrying values as of June 30, 1998 because of their
short-term nature and/or variable interest rates. In the case of the facility
note payable at June 30, 1998, fair value is estimated as $8,245,000 and
carrying value is $6,755,950.

NOTE 9 - COMMITMENTS

Operating Leases

The Company leases various equipment and real estate under non-cancelable
operating lease agreements which require future cash payments.

The Company incurred rental expense under its operating lease agreements of
$372,576, $38,998 and $40,187 for fiscal 1996, 1997,and 1998, respectively.

The Company leased 80,000 square feet of its facility to an affiliated company,
TSI California, for $20,000 a month. Effective July 1, 1998, TSI California
became a wholly-owned subsidiary of the Company. See Note 13-Subsequent Events.
As a result, going forward the Company will not be earning this lease income.





                                      F-14
<PAGE>   36

NOTE 10- CONTINGENCIES

In fiscal year 1997, the lamp division experienced a decrease in lamp sales to
the lamp division's primary customer from which it has not recovered. Although
orders to that customer appear to have stabilized over the last twelve months,
this division is currently pursuing an aggressive strategy of inventory
reduction through select "seconds" retailers. The Company's management
originally anticipated that this inventory reduction could be accomplished by
June 30, 1998; however, due to a limited resource of labor available, the
Company's management has reevaluated the time frame and estimates completion
between December 1998 and March 1999. Management will continue to closely
monitor this division and its financial results to determine the feasibility of
this division continuing as a single-customer manufacturer with limited overhead
or the dissolution of this division. Management currently believes that the net
lamp inventory existing at June 30, 1998 of $1,676,371 can be liquidated at a
small profit.

Due to the nature of the Company's business, it could be a party in legal or
administrative proceedings arising in the ordinary course of business. Although
occasional adverse settlements or resolutions may occur and negatively impact
earnings in the year of settlement, after consideration of the Company's
insurance coverage, it is the opinion of management that the ultimate resolution
would not have a materially adverse effect on the Company's financial position
or its results of operations.

The Company provides a limited warranty against workmanship or materials for its
ceiling fans for one year and also provides a 25 year warranty with respect to
the motor contained in all fans except for certain high-end models which carry a
limited lifetime warranty. Since inception of the Company's relationship with
its major supplier of such fans, the supplier has extended the Company full
credit for all product returns. Accordingly, no reserve for warranty has been
accrued in the accompanying consolidated financial statements. Should the
Company's relationship change in the future with respect to such supplier, the
Company would be liable for any claims received during the warranty period.
Based upon historical experience, management believes future claims resulting
from defects in workmanship or materials are not significant to the Company's
operations.

NOTE 11 - 401(K) DEFINED CONTRIBUTION PLAN

The Company has a qualified 401(k) defined contribution plan which covers
substantially all full-time employees who have met certain eligibility
requirements. Employees are allowed to tax defer the lesser of 10% of their
annual compensation or $9,500. The Company will match one-half of the
participant's contributions up to 6% of their annual compensation. The Company's
matching contribution for the years ended June 30, 1996, 1997 and 1998
aggregated approximately $47,000, $41,000 and $46,000, respectively.

NOTE 12 - MAJOR SUPPLIER, MAJOR CUSTOMER AND RELATED PARTY

On December 7, 1989, the Company and its major Supplier (the "Supplier") entered
into a written agreement, terminable on 180 days prior notice, pursuant to which
the Supplier has agreed to manufacture Craftmade ceiling fans for the Company.
The Supplier is permitted under the arrangement to manufacture ceiling fans for
other distribution provided such ceiling fans are not a replication of the
Craftmade series or models.

Fans and accessories manufactured and sold to the Company by the Supplier
account for approximately 85%, 95% and 96% of the Company's purchases in fiscal
1996, 1997 and 1998, respectively. As of June 30, 1997 and 1998, the Supplier
owned 151,794 shares of the Company's common stock, adjusted for the Company's
three-for-two stock split, representing 3.5% of outstanding common stock. The
Company, at its option, may repurchase the shares for an aggregate purchase
price of $137,774.




                                      F-15
<PAGE>   37

Sales during fiscal 1998 to one of Durocraft's customers aggregated $1,323,886.
Sales to this customer represented approximately 85% of that division's fiscal
1998 net sales.


NOTE 13- SUBSEQUENT EVENTS

Effective July 1, 1998, the Company entered into an agreement and plan of merger
with Trade Source International, Inc., a California corporation ( TSI
California) engaged in the wholesale distribution of outdoor lighting fixtures
to mass merchandisers. As a result, the Company acquired TSI California from its
existing shareholders and merged it into the Company's wholly-owned subsidiary,
Trade Source International, Inc., a Delaware corporation (TSI Delaware). The
total purchase price was approximately $11 million paid in a combination of
approximately $3.6 million cash and approximately 656,000 shares of Craftmade's
common stock that had previously been repurchased by the Company related to the
Company's stock repurchase program. This transaction will be accounted for under
the purchase method of accounting and the results of operations of TSI Delaware
will be consolidated subsequent to July 1, 1998. The excess of the purchase
price over the estimated fair value of the acquired net assets, which
approximates $5.6 million, will be recorded as goodwill and amortized over 15
years.

The unaudited pro forma combined condensed balance sheet of the Company and TSI
- Delaware as of June 30, 1998 after giving effect to certain pro forma
adjustments is as follows:

<TABLE>
ASSETS

<S>                                                    <C>        
Current Assets                                         $29,155,431
Property and Equipment, Net                              9,602,393
Goodwill                                                 5,593,998
Other                                                      239,326
                                                       -----------
                                                       $44,591,148
                                                       ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities                                    $17,691,762
Other Non-Current Liabilities                            6,182,752
Shareholders' Equity                                    20,716,634
                                                       -----------
                                                       $44,591,148
                                                       ===========
</TABLE>





                                      F-16
<PAGE>   38





The unaudited pro forma combined results of operations of the Company and TSI -
Delaware for the year ended June 30, 1998 after giving effect to certain pro
forma adjustments are as follows:

<TABLE>
<S>                                               <C>        
Net Sales                                         $67,755,665
                                                  ===========
Net Income                                        $ 3,753,472
                                                  ===========
Earnings per share
    Basic and Diluted                             $       .75
                                                  ===========

Weighted average shares outstanding
     Basic                                          5,018,625
                                                  ===========
     Diluted                                        5,027,504
                                                  ===========
</TABLE>

In connection with the TSI California acquisition, on July 1, 1998 the Company
negotiated an increase in the availability under its line of credit to $14
million.




                                      F-17
<PAGE>   39
                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                         DESCRIPTION
       -------                        -----------

<S>             <C>
         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 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 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.

         21     - Subsidiaries of the Registrant.

         27.1   - Financial Data Schedule.

         27.2   - Restated Financial Data Schedules.
</TABLE>