About EDGAR Online | Login
 
Enter your Email for a Free Trial:
The following is an excerpt from a 10-K SEC Filing, filed by CRAFTMADE INTERNATIONAL INC on 9/26/2000.
Next Section Next Section Previous Section Previous Section
CRAFTMADE INTERNATIONAL INC - 10-K - 20000926 - PART_I

PART 1

Item 1. Business

THE COMPANY

Craftmade International, Inc. ("Craftmade") was incorporated in the state of Texas on July 16, 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, outdoor lighting, bathstrip lighting and related accessories to a nationwide network of over 1,600 lighting showrooms and electrical wholesalers specializing in sales to the remodeling, new home construction and replacement markets. An arrangement with Fanthing Electrical Corp. ("Fanthing"), in Taichung, Taiwan was completed in August 1986 for the manufacture of ceiling fans designed to Craftmade's specifications. Craftmade's ceiling fan product line consists of over two dozen series of premium priced to lower priced ceiling fans and is distributed under the Craftmade(R) trade name. Craftmade also markets nearly eighty light kit models in various colors for attachment and use with its ceiling fans or other ceiling fans, along with parts and accessories for its ceiling fans and light kits. In addition, nearly two dozen styles of bathstrip lighting and over forty designs of outdoor lighting are marketed under its Accolade(R) trade name. Craftmade purchases substantially all of its light kits from Sunlit Industries ("Sunlit"), in Taipei, Taiwan. The combination of design and functional features which characterize Craftmade ceiling fans have made them, in management's judgment, one of the most reliable, durable, energy efficient and cost effective ceiling fans in the marketplace. Craftmade's national sales organization, which consists of 33 independent sales groups employing approximately 65 sales representatives, markets its products to its distribution network of lighting showrooms and electrical wholesalers. Craftmade also assembles and markets a variety of lamp styles for sale to certain major retail chains and catalog houses and imports and distributes a variety of cables and components for the telephone and communications industries.

Effective July 1, 1998, Craftmade entered into an agreement and plan of merger in which Trade Source International, Inc., a California corporation ("TSI California"), merged with and into Trade Source International, Inc., a Delaware corporation and wholly-owned subsidiary of Craftmade ("TSI"). TSI is principally engaged in the design, distribution and marketing of outdoor lighting and the sale of fan accessories to mass merchandisers.

Craftmade, TSI and their wholly-owned subsidiaries are collectively referred to in this report as the "Company."

See Note 16 - Segment Information in the Notes to Consolidated Financial Statements for certain financial information about the Company's two segments, Craftmade and TSI.

CRAFTMADE PRODUCTS

CEILING FANS -- Craftmade's ceiling fan product line consists of over two dozen fan series for sale to the new home construction, remodeling and replacement markets. These series are differentiated on the basis of cost, air movement and appearance. Craftmade's 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's 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, Constantina, Crescent and Presidential series to various low-end builder series. Craftmade's fans come in five motor sizes, five blade sizes and over three dozen different decorative finishes. The range of styles and colors gives consumers the ability to select ceiling fans for any style of house, interior decoration or living and working area, including outdoor patios. Craftmade provides warranties ranging from 10 years to lifetime on the fan motor of its ceiling fans, and includes a one year limited warranty against defects in workmanship and materials to cover the entire ceiling fan. Craftmade also provides a limited lifetime warranty on its higher-end series of fans. While Craftmade's agreement with Fanthing does not contain provisions relating to adjustments or returns as a result of product defects, Fanthing has previously extended Craftmade full credit for any product returns during the period of their working relationship. Ceiling fans accounted for 33%, 32% and 68% of the Company's sales for fiscal 2000, 1999 and 1998 respectively.

-1-

LIGHT KITS -- Craftmade markets nearly eighty models of light kits in various colors which may be utilized with Craftmade's ceiling fans or other ceiling fans. These kits, which consist of the glass shades and fitters, represent less than 10% of the Company's sales in fiscal 2000 and fiscal 1999 and 15% of the Company's sales in fiscal 1998.

BATHSTRIP LIGHTING -- Craftmade markets nearly two dozen series of bathstrip lighting in different lengths and decorative finishes under the Accolade(R) trade name. Craftmade plans to add finishes and series from time to time based on customer demand. Bathstrip lighting represents less than 10% of the Company's fiscal 2000, 1999 and 1998 sales.

OUTDOOR LIGHTING - During fiscal 1999, Craftmade began marketing over forty designs of outdoor lighting in different decorative finishes under the Accolade(R) trade name. Craftmade plans to add finishes and designs from time to time based on customer demand. Outdoor lighting represents less than 10% of the Company's fiscal 2000 and fiscal 1999 sales.

ACCESSORIES -- Craftmade 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. Accessory sales represent 12% of the Company's fiscal 2000 sales, and less than 10% of the Company's fiscal 1999 and 1998 sales.

LAMPS - Craftmade 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. Craftmade's lamp sales represent less than 10% of the Company's fiscal 2000, 1999 and 1998 sales.

CABLE COMPONENTS - Craftmade distributes various cable components, including connectors and switches that it acquires from Asian manufacturers for use with computers and telephone board circuitry. Sales of cable components represent less than 10% of the Company's fiscal 2000, 1999 and 1998 sales.

TSI PRODUCTS

CEILING FANS - During fiscal 2000, the Company began marketing selected ceiling fans to TSI's mass merchandiser customers in accordance with the Company's cross-market product expansion plans. TSI's sales of ceiling fans represent less than 10% of the Company's fiscal 2000 sales.

OUTDOOR LIGHTING - TSI markets over sixty designs of outdoor lighting in different decorative finishes to various mass merchandisers. TSI's sales of outdoor lighting represent 28% and 34% of the Company's fiscal 2000 and 1999 sales, respectively.

ACCESSORIES - TSI also markets various fan accessories, including universal downrods, pullchains and ceiling medallions, to various mass merchandisers through its 50% owned company, Prime/Home Impressions, LLC. TSI's accessories sales represent 11% and 10% of the Company's fiscal 2000 and 1999 sales, respectively.

INDOOR LIGHTING - During fiscal 2000, the Company began marketing floor and table lamps, chandeliers and wall sconces designed by Pat Dolan to various mass merchandisers through its 50% owned company, Design Trends, LLC. TSI's sales of indoor lighting represent less than 10% of the Company's fiscal 2000 sales.

MANUFACTURING

Craftmade's ceiling fans, bathstrip lighting and substantially all of its light kits and certain accessories are produced by Fanthing and Sunlit. Craftmade selected Fanthing in August 1986 to manufacture all of its ceiling fans and certain fan accessories based on the Company's belief that Fanthing has the capability to produce and ship a wide variety of product on a cost effective basis while maintaining excellent quality

-2-

control in the manufacturing process. In 1989, Craftmade and Fanthing entered into a formal written agreement that is terminable on 180 days prior notice. The written agreement does not obligate Fanthing to produce and sell fans to Craftmade in any specified quantity, nor does it obligate Fanthing to sell products to Craftmade at a fixed price. Fanthing is permitted under the arrangement to manufacture ceiling fans for other distributors provided such ceiling fans are not a replication of Craftmade's series or models. Fanthing also manufactures certain ceiling fan accessories, such as downrods, which are sold by Craftmade independently of its ceiling fans.

Fanthing has provided Craftmade with a $1,000,000 credit facility, pursuant to which Fanthing will manufacture and ship ceiling fans prior to receipt of payment from Craftmade. Accordingly, payment can be deferred until delivery of such products. At present levels, such credit facility is equivalent to approximately three weeks' supply of ceiling fans and represents a supplier commitment that the Company's management believes is unusual for the industry and favorable to the Company. Fanthing is not required to provide this credit facility under its agreement with Craftmade, and Fanthing may discontinue this credit facility at any time. Craftmade 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 Craftmade 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 Craftmade's designated freight forwarder following payment for such containers at Fanthing's bank in Taiwan.

Under a stock purchase agreement between the Company and Fancy Industrial, Inc. ("Fancy"), a Texas corporation and a wholly-owned subsidiary of Fanthing, the Company, at its option, may repurchase 227,691 shares of the Company's common stock owned by Fancy for an aggregate purchase price of $138,000. At June 30, 2000 and 1999, the fair value of the option approximated $1,537,000 and $2,960,000 respectively. The Company has no intention to reacquire any shares from Fancy at this time. The Company's management currently believes that Craftmade's relationship with Fanthing and its ability to supply quality ceiling fans at competitive prices have been critical to the success of Craftmade. The Company's management currently believes Craftmade's relationship with Fanthing is 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 Craftmade in the future or should it be unable to continue to supply sufficient amounts of Craftmade products, Craftmade would be required to seek alternative sources of supply. The Company's management currently believes Craftmade could secure alternative sources of supply with minimal business disruption.

Craftmade purchases its bathstrip lighting and substantially all of its light kits from Sunlit. 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. Craftmade offers a variety of light kits in various finishes and colors, as well as a variety of fixtures designed for ceiling fans. Craftmade 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.

Craftmade and TSI purchase outdoor lighting from several manufacturers located in Asia. Outdoor lighting orders are received in container-size lots, similar to light kit and ceiling fan orders. However, the outdoor lighting manufacturers require payment seven days after notification of shipment of the order. Craftmade and TSI offer a wide variety of outdoor lighting styles in various finishes, colors and sizes and are designed for either wall mounting or as post-mounted fixtures.

Craftmade's wall controls, timers and switches as well as certain of its ceiling fan blades, are manufactured by companies based in the United States. Craftmade 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.

Craftmade assembles its lamps at its Coppell facility. This assembly includes the placement of the base,

-3-

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, Craftmade does undertake limited manufacturing of certain shade components. Craftmade purchases its components on a non-exclusive basis from such suppliers on either open account or through letters of credit.

TSI purchases most of its ceiling fan accessories from several manufacturers located in Asia, with the exception of ceiling medallions which are purchased from a manufacturer located in the United States. These products are also shipped on containers, either to the Company's facility in Coppell, Texas or directly to the customer. All of TSI's foreign vendors require payment seven days after notification of shipment of product from Asia.

DISTRIBUTION

Craftmade's products are marketed through more than 1,600 lighting showrooms and electrical wholesaler locations specializing in sales to the new home construction, remodeling and replacement markets. Its ceiling fans, light kits, outdoor lighting and accessories are distributed through 33 independent sales groups on a national basis (except for Alaska and Hawaii). Each sales group is selected to represent Craftmade in a specific market area. The independent sales groups comprise a sales force for Craftmade's products of approximately 65 sales representatives, which represent Craftmade exclusively in the sale of ceiling fans in return for commissions on such sales. During fiscal 2000, 1999 and 1998, no single lighting showroom or electrical wholesaler accounted for more than 2% of Craftmade's sales.

Sales representatives are carefully selected and continually evaluated in order to promote high-level representation of Craftmade's products. Craftmade employees 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 its products. Additional training is provided on a regular basis, especially for new product series, at semi-annual trade shows held throughout the United States. Management believes it has assembled a highly motivated and effective sales representative organization that has demonstrated a strong commitment to Craftmade and its products. Management further believes that the strength of its sales representative organization is primarily attributable to the quality and competitive pricing of Craftmade's products as well as the ongoing administrative and marketing support that Craftmade provides to its sales representatives.

All of TSI's sales are to mass merchandisers. During fiscal 2000, TSI's two largest customers represented 48% and 25% of TSI's sales, (19% and 10% of consolidated sales, respectively). During fiscal 1999, TSI's sales to its two largest customers were 47% and 29%, (20% and 13% of consolidated sales, respectively). The majority of TSI's sales are by direct shipment. The remaining sales are shipped from the Company's Coppell, Texas facility. TSI utilizes an internal sales force to market its products and sales representatives to service specific mass merchandiser locations.

MARKETING

Craftmade relies primarily on the reputation of its ceiling fans, outdoor lighting and light kits for high quality and competitive prices and the efforts of its sales representative organization in order to promote the sales of its products. The principal markets for Craftmade's products are the new home construction, remodelling and replacement markets. Craftmade utilizes advertising in home lighting magazines, particularly in special editions devoted to ceiling fans and lighting fixtures, and broadly distributes its product catalog. Craftmade also promotes its ceiling fans and light kits at semi-annual trade shows in Dallas (January and June) and maintains a showroom at the Dallas Trade Mart. Craftmade provides warranties ranging from 10 years to lifetime on the fan motor of its ceiling fans, and includes a one year limited warranty against defects in workmanship and materials to cover the entire ceiling fan. Craftmade also provides a limited lifetime warranty on its higher-end series of fans. The Company's management believes these warranties are highly attractive to dealers and consumers alike.

TSI relies primarily on the reputation of its products and the relationship it has with its mass merchandiser customers to increase its sales. TSI participates in advertising programs and special promotions performed by its customers. TSI also promotes its product line at semi-annual trade shows in Dallas (January and June) and utilizes Craftmade's showroom at the Dallas Trade Mart.

-4-

The Company has a 48-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."

For information concerning revenues of the Company attributable to foreign and domestic customers, along with information concerning foreign and domestic long-lived assets of the Company, see Note 16 - Segment Information in the Notes to Consolidated Financial Statements.

PRODUCT EXPANSION

Craftmade 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. During fiscal 2000, Craftmade introduced four new series of fans (Solo, Warbird, Max Air 29 and Terrace). The Company also expanded its light kit product line to include under cabinet lighting and additional parts and accessories complementing its various product lines. The Company's management will continue to search for opportunities for product expansion that it considers complementary to the Company's existing product lines.

Over the next year, the Company plans to enlarge its presence in the mass merchandiser market by introducing new lines of interior lighting products to TSI's customer base. In addition, the Company will continue to seek opportunities to cross-market products between the two companies without jeopardizing existing business. In June 2000, outdoor lighting was added to Craftmade's lighting showroom catalog which is distributed to over 1,600 lighting showrooms. The expansion of the catalog is expected to significantly increase cross-marketing opportunities in fiscal 2001.

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

Backlog is not material to the Company's operations as substantially all of the Company's products are shipped to customers within 48 hours following receipt of orders. Presently, the Company is accepting orders 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 the ceiling fan industry include Casablanca, Hunter, Monte Carlo, Quorum, Emerson Electric and Taconi. A number of other well-established companies are also currently engaged in activities that compete directly with those of Craftmade. Some of Craftmade's competitors are better established, have longer operating histories, substantially greater financial resources or greater name recognition than Craftmade. However, the Company's management believes that the quality of Craftmade's products, the strength of its marketing organization and the growing recognition of the Craftmade name will enable Craftmade to compete successfully in these highly competitive markets.

The mass merchandiser market is also highly competitive. TSI competes with numerous companies located both within the United States and outside of the country, particularly in Asia. Some of the major companies in the lighting fixture industry include Designer's Fountain, American Lantern, Murray Feiss, and Minka. In addition, mass merchandisers themselves will, at times, compete directly against TSI by purchasing private label products from TSI's vendors. However, the Company's management believes that TSI has positioned itself with its customers in a manner that reduces some of the risks involved of competing in the mass merchandiser market.

INDEPENDENT SAFETY TESTING

All of the ceiling fans, outdoor lighting, light kits and lamps sold by the Company in the United States are tested by Underwriter's Laboratories (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

-5-

Company voluntarily submits its products to UL, and UL tests the products for safety. If the product is acceptable, UL issues a listing report that 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 businesses that 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 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 its products or current business operations. The Company, however, has patented certain of its product designs and the functional features of some of its products, including a patent on its Cathedral Ceiling Adapter and the Carousel light kit. The expiration dates of Craftmade's patents (excluding pending applications) currently range from 2008 to 2014. In addition, Fanthing holds certain Taiwanese patents covering specific technology employed in Craftmade ceiling fans, but the Company's management does not believe that such patents are material to the production of Craftmade products. From time to time, the Company also enters into license agreements with various designers of the Company's products, including license agreements concerning licenses on patents for eight series of fans and certain other license agreements entered into in the ordinary course of its business. The Company has registered the trademarks Craftmade(R), Accolade(R) and Durocraft(R), along with the product names of certain of its designs, with the United States Patent and Trademark Office.

EMPLOYEES

As of July 31, 2000, the Company employed a total of 123 full time employees, including three executive officers, two TSI officers, twenty-two managers, twenty-nine clerical and administrative personnel, sixteen marketing personnel; thirty-six warehouse personnel and fifteen 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 and is used by both Craftmade and TSI. The Company's management believes that this Company-owned facility will be sufficient for its purposes for the foreseeable future. See Note 5 - Note Payable in the Notes to Consolidated Financial Statements.

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 approximately $4,000.

TSI leases office space from an employee of TSI. This lease is for $4,500 per month and expires June 30, 2001.

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 Stockholders

No matters were submitted to a vote of stockholders during the fourth quarter of fiscal year 2000.

-6-

PART II

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

The initial public offering price of the Company's common stock in April 1990 was $1.55 per share, adjusted for the Company's three-for-two stock splits effective October 30, 1998 and October 31, 1997. The common stock trades 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 and adjusted for the Company's three-for-two stock splits.

                                                                            Dividends
                                                       High       Low       per share
                                                       ----       ---       ---------
Fiscal Year Ended June 30, 1999:
     First Quarter                                    $12.92     $ 8.45     $  .02
     Second Quarter                                    16.63       7.67        .02
     Third Quarter                                     17.13      13.81        .02
     Fourth Quarter                                    14.50      11.69        .02

Fiscal Year Ended June 30, 2000:
     First Quarter                                     14.88       6.88        .02
     Second Quarter                                     9.56       5.75        .02
     Third Quarter                                      9.69       6.13        .02
     Fourth Quarter                                     7.38       4.00        .04

Fiscal Year Ended June 30, 2001:
     First Quarter (Through July 31, 2000)              8.75       6.38

On August 31, 2000, there were 102 holders of record of the Company's common stock.

Computershare Investor Services, 311 West Monroe Street, 14th Floor, Chicago, Illinois 60606, is the transfer agent and registrar for the Company's common stock.

RECENT SALES OF UNREGISTERED SECURITIES

On July 1, 1998, the Company acquired all of the outstanding capital stock of TSI California through the merger of TSI California with and into TSI, a wholly-owned subsidiary of Craftmade. Pursuant to the merger, the Company issued 595,450 and 388,411 shares of common stock, as adjusted for the Company's three-for-two stock split effective October 30, 1998, to Neall and Leslie Humphrey and John DeBlois, respectively, the former shareholders of TSI California. The shares were issued in a private offering pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended.

-7-

Item 6. Selected Financial Data

The selected financial data in the tables below are for the five fiscal years ended June 30, 2000. The data should be read in conjunction with the financial statements and notes, which are included elsewhere herein. Effective July 1, 1998 the Company acquired TSI. This acquisition may affect the comparability of the information contained in the tables below.

                                                          For the years ended
                                        --------------------------------------------------------
                                                 (in thousands, except per share data)

                                        June 30,    June 30,    June 30,    June 30,    June 30,
                                         2000         1999        1998        1997        1996
                                        --------    --------    --------    --------    --------
Selected Operating Results:
--------------------------
Net sales                               $85,499     $84,986     $40,903     $39,523     $36,320
Gross profit                             29,859      30,295      16,325      14,261      12,884
Net income                                4,280       5,689       3,046       2,113       1,826
Basic and diluted earnings
   per common share                         .63         .76         .46         .31         .25
Cash dividends declared
   per common share                     $   .10     $   .08     $   .08     $   .05     $   .04
Basic common
    shares outstanding                    6,781       7,523       6,544       6,834       7,321
Diluted common
    shares outstanding                    6,781       7,535       6,557       6,838       7,326

                                        June 30,    June 30,    June 30,    June 30,    June 30,
                                          2000        1999        1998        1997        1996
                                        --------    --------    --------    --------    --------
Summary Balance Sheet:
---------------------
Current assets                          $35,483     $31,975     $18,974     $20,431     $17,835
Current liabilities                      24,221      18,668       8,837      11,487       8,799
Long-term debt                            8,588       4,677       6,077       7,989       8,519
Total assets                             50,101      47,257      28,350      30,278      27,996
Stockholders' equity                     16,959      23,363      13,338      10,720      10,633
Book value per common share             $  2.74     $  3.16     $  2.03     $  1.63     $  1.47

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

CAUTIONARY STATEMENT

With the exception of historical information, the matters discussed in this Item 7 and elsewhere in this Annual Report on Form 10-K contain forward-looking statements. There are certain important factors which could cause results to differ materially from those anticipated by 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, TSI's dependence on select mass merchandisers, customer acceptance of existing and new products, pricing pressures due to excess capacity, cost increases, changes in tax or interest rates, unfavorable economic and political developments in Asia, the location of the Company's primary vendors, declining conditions in the home construction industry, inability to realize deferred tax assets, and other uncertainties, all of which are difficult to predict and many of which are beyond the control of the Company.

On July 1, 1998, Craftmade acquired Trade Source International, Inc. ("TSI"). As a result, the operations and financial position of TSI are included in the operations and financial position of the Company for fiscal 2000 and 1999 only. See Note 3 - TSI Acquisition in the Notes to Consolidated Financial Statements.

-8-

RESULTS OF OPERATIONS

Fiscal year ended June 30, 2000 compared to fiscal year ended June 30, 1999.

Net sales increased $513,000 to $85,499,000 for the year ended June 30, 2000 from $84,986,000 for the year ended June 30, 1999. Sales of the Craftmade division increased $2,834,000, which was partially offset by a $2,321,000 decline in sales of the TSI division. Craftmade's sales benefited from an increase in fan sales of $2,226,000, or 8.5%, for the year ended June 30, 2000 compared to the previous year. The Company's management anticipates that Craftmade will continue to benefit from its marketing strategy of selective expansion of its distribution base and the updating of Craftmade's product lines. In addition, the Company's strategy of marketing selected TSI products through Craftmade's distribution channel produced approximately $2,225,000 in net sales for Craftmade for the year ended June 30, 2000 compared to $850,000 in the previous year. The decline in sales of the TSI division was partially due to the fact that one of TSI's major customers reduced its level of purchasing during the first quarter of fiscal 2000 while it continued to sell previously purchased inventory. The Company's management anticipates that future growth of the TSI division will come from expanding its product offerings, particularly through its 50% ownership interest in Design Trends, LLC, and consequently expanding its customer base to include regional and national specialty retailers and department stores in addition to the mass retailers and major home center customers it now serves.

Gross profit declined to 34.9% of sales, or $29,859,000, for the year ended June 30, 2000 compared to 35.6% of sales, or $30,295,000, for the year ended June 30, 1999. The gross margin of the Craftmade division declined to 42.5% from 43.0% for the year ended June 30, 1999, primarily due to the write-down of the lamp inventory to estimated net realizable value. TSI's gross profit margin declined to 23.9% compared to 26.2% for the year ended June 30, 1999. The decline was due to an increase in direct shipment sales from foreign manufacturers, which carry lower margins than domestic shipments, as well as additional rebates provided to two of the division's larger customers to assist in clearing certain categories of slow-moving inventory.

Total selling, general and administrative (SG&A) expenses increased $1,107,000 to $19,329,000, or 22.6% of net sales, for the year ended June 30, 2000 from $18,222,000, or 21.4% of net sales, for the year ended June 30, 1999. SG&A expenses of the Craftmade division increased to $13,704,000 or 27.1% of net sales compared to $12,155,000 or 25.5% of net sales in the previous year. The increase in SG&A expenses of Craftmade as a percentage of sales was primarily due to the decline in lamp sales during the year ended June 30, 2000, which resulted in the de-leveraging of SG&A expenses compared to the previous year when lamp inventory was being aggressively liquidated. The increase in SG&A expense dollars of Craftmade is primarily attributable to increases in commissions and certain other costs directly correlated to the sales increase experienced by Craftmade and to the increase in employee costs related to the growth in the Company's labor force necessary to meet its increased sales. SG&A expenses from TSI declined $442,000 to $5,625,000 or 16.1% of net sales from $6,067,000 or 16.3% of net sales for the year ended June 30, 1999. Lower SG&A expenses as a percentage of sales were achieved by TSI due to sales via direct shipments from vendor facilities.

Net interest expense increased $352,000 to $1,645,000 for the year ended June 30, 2000 from $1,293,000 for the year ended June 30, 1999. This increase was primarily the result of a net increase in the Company's revolving lines of credit and an increase in the Company's note payable. The proceeds were utilized to repurchase the Company's common stock.

The provision for income taxes declined to $2,583,000 or 37.6% of income before taxes but after minority interest, for the year ended June 30, 2000 from $3,336,000, or 36.9% of income before taxes but after minority interest for the year ended June 30, 1999. The increase in the effective rate relates to an increase in non-deductible expenses, primarily amortization of goodwill, as a percentage of pretax income.

Minority interest of $1,148,000 for the year ended June 30, 2000 represented the 50% ownership of PHI and Design Trends by non-company owned members. The non-Company owned interests have been accounted for as a minority interest.

Net income declined to $4,280,000, or diluted earnings per common share of $.63, for the year ended June 30, 2000 from $5,689,000, or diluted earnings per common share of $.76, for the year ended June 30, 1999. The decline in net income was primarily attributable to the decline in TSI's sales and gross margins, and the

-9-

de-leveraging of SG&A expenses in the Craftmade division due to the lower sales of lamp products compared to the year ended June 30, 1999.

Fiscal year ended June 30, 1999 compared to fiscal year ended June 30, 1998.

Net sales increased to $84,986,000 for the year ended June 30, 1999 from $40,903,000 for the year ended June 30, 1998, representing an increase of $44,083,000. Net sales of TSI represented $37,260,000 of this increase. The remaining increase of $6,823,000 or 16.7% was primarily the result of an increase in sales from Craftmade which continued to receive the benefits from a strong housing market and the aggressive marketing strategy begun in fiscal 1998 of revising product mix to meet market demands, providing more competitive pricing for its customer base and introducing innovatively-designed proprietary products across all product lines. In connection with this strategy, Craftmade introduced four new styles of fans that generated an additional $1,589,000 in sales for fiscal 1999. Also, sales from Craftmade's bathstrip lighting product line increased 37% to $3,348,000 this fiscal year, as this product line continued to gain market share. In addition, the Company's strategy of marketing selected TSI products through Craftmade's distribution channel produced approximately $850,000 in net sales for Craftmade in fiscal 1999. TSI's sales were strong through the first three quarters of fiscal 1999. However, TSI experienced a temporary weakness in orders in the fourth quarter from a major customer while that customer reduced inventory stocking levels.

Gross profit increased to $30,295,000 for the year ended June 30, 1999 compared to $16,325,000 for the year ended June 30, 1998. Gross profit from TSI represented $9,757,000 of this increase. The remaining increase of $4,213,000 was primarily the result of Craftmade's increasing sales. The decline in gross profit margin from 39.9% for the year ended June 30, 1998 to 35.6% for the year ended June 30, 1999 was primarily attributable to the TSI acquisition. TSI's gross profit margin was 26.2% for the year ended June 30, 1999. Craftmade's gross profit margin increased from 39.9% in fiscal 1998 to 43.0% in fiscal 1999. The increase in gross margins was attributable to the success of Craftmade's higher-end, proprietary products that carry higher margins.

Total SG&A expenses increased $8,161,000 to $18,222,000, or 21.4% of net sales, for the year ended June 30, 1999 from $10,061,000, or 24.6% of net sales, for the year ended June 30, 1998. Total SG&A expenses from TSI represented $6,067,000 of this increase. Total SG&A expenses as a percentage of sales for TSI were 16.3% for the year ended June 30, 1999 and included a charge of $427,000 related to the uncollectibility of an accounts receivable balance from one of its customers that filed bankruptcy. The remaining increase of $2,094,000 was primarily attributable to increases in commissions and certain other costs directly correlated to the sales increase experienced by Craftmade and to the increase in employee costs related to the growth in the Company's labor force necessary to meet its increased sales. Total SG&A expenses as a percentage of sales, excluding TSI, were 25.5% for the year ended June 30, 1999 compared to 24.6% for the year ended June 30, 1998. This increase as a percentage of sales was attributable to Craftmade incurring certain costs necessary to support the additional responsibilities resulting from the TSI acquisition and the expensing of certain costs associated with the TSI acquisition.

Net interest expense increased $62,000 to $1,293,000 for the year ended June 30, 1999 from $1,231,000 for the year ended June 30, 1998. Net interest expense from TSI represented $113,000 of the interest expense for the year ended June 30, 1999 and related to interest expense from PHI's line of credit. Craftmade interest expense decreased $51,000 as a result of additional facility note payments of $600,000 and a more favorable borrowing rate. Craftmade utilized funds from its line of credit to provide the $3,621,000 in cash required for the TSI acquisition.

The provision for income taxes increased to $3,336,000, or 37% of income before taxes but after minority interest, for the year ended June 30, 1999 from $1,734,000, or 36% of income before taxes, for the year ended June 30, 1998. The increase in the effective rate relates to higher state income taxes associated with operations in California.

Minority interest of $950,000 for the year ended June 30, 1999 represented the 50% ownership of PHI by a non-company owned member.

Net income increased to $5,689,000, or diluted earnings per common share of $.76 for the year ended June 30, 1999 from $3,046,000, or diluted earnings per common share of $.46 for the year ended June 30, 1998. This increase in net income was primarily attributable to the net income of $1,250,000 that TSI generated

-10-

for fiscal 1999 and the increase in sales and gross profit margin achieved by Craftmade.

LIQUIDITY AND CAPITAL RESOURCES

Fiscal year ended June 30, 2000.

The Company's cash decreased $392,000, from $1,563,000 at June 30, 1999 to $1,171,000 at June 30, 2000. The Company's operating activities provided cash of $2,652,000 during the year ended June 30, 2000 compared to $5,919,000 during the year ended June 30, 1999. This cash flow was primarily attributable to the Company's net income from operations which was partially offset by increases in accounts receivable and inventory levels.

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 totaling $15,322,000 at June 30, 2000. Management believes that the Company has sufficient amounts of working capital, trade credit and availability under its bank lines to fund this level of inventory.

Cash used for investing activities of $234,000 was primarily related to the purchase of general warehouse, office and computer equipment.

Cash used for financing activities of $2,810,000 was primarily the result of (i) the repurchase of 1,198,500 shares of the Company's common stock at an aggregate cost of $10,012,000, (ii) distributions to minority interest members of $1,369,000, (iii) principal payments of $723,000 on the Company's notes payable, and (iv) cash dividends of $672,000. These amounts were partially offset by the net advance of $5,650,000 under the Company's lines of credit and the borrowing of an additional $4,316,000 under the Company's note payable. It is management's intention to repurchase the Company's common stock from time to time under Board approved plans as long as the Company's common stock continues to present an attractive investment for the Company. As of June 30, 2000 the Company's Board of Directors had authorized the Company's management to repurchase up to 2,350,000 shares of the Company's outstanding common stock, of which 1,376,000 shares at an aggregate cost of $12,560,000 had been repurchased.

At June 30, 2000, subject to continued compliance with certain covenants and restrictions, the Company had $19,000,000 available on its line of credit, of which $15,600,000 had been utilized. In addition, PHI had $3,000,000 available on its line of credit, of which $2,000,000 had been utilized. The Company's management believes that its current lines of credit, combined with cash flows from operations, are adequate to fund the Company's current operating needs, make annual payments under the note payable of approximately $1,200,000, fund the stock repurchase program and anticipated capital expenditures, as well as permit the Company to continue its projected growth over the next twelve months. In addition, it is management's intention to continue to utilize excess cash flow to reduce outstanding indebtedness.

During the third quarter of fiscal 2000, the Company entered into an agreement to increase the principal amount of its note payable to $9,200,000 to fund the stock repurchase program. At June 30, 2000, $9,058,000 remained outstanding under the twelve-year note payable for the Company's 378,000 square foot operating facility. The Company's management believes that this facility will be sufficient for its purposes for the foreseeable future.

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

Fiscal year ended June 30, 1999.

The Company's cash increased $638,000, from $925,000 at June 30, 1998 to $1,563,000 at June 30, 1999. The Company's operating activities provided cash of $5,919,000 during fiscal 1999 compared to $5,596,000 during fiscal 1998. This increase in cash flows was primarily attributable to the Company's net income from operations, which was partially offset by changes in inventory levels.

-11-

Cash used for investing activities of $2,474,000 was primarily related to $2,041,000 of net cash paid for the TSI acquisition. The remaining $433,000 of cash used for investing activities was related to the purchase of general warehouse, office and computer equipment.

Cash used for financing activities of $2,807,000 was primarily the result of (i) principal payments of $1,329,000 on the notes payable, (ii) the repurchase of 177,500 shares of the Company's common stock in connection with the Company's stock repurchase plan at an aggregate cost of $2,548,000, (iii) distributions to PHI's minority interest member of $614,000 and (iv) cash dividends of $556,000. These amounts were partially offset by the net advance of $2,179,000 on the Company's line of credit.

NEW ACCOUNTING PRONOUNCEMENTS

Accounting for Derivative Instruments and Hedging Activities - In June 1998, the Financial Accounting Standards Board issued FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". FAS 133 requires that derivative instruments be measured at fair value and recognized in the balance sheet as either assets or liabilities, as the case may be. Gains and losses on derivatives designated as hedges against the cash flow effect of a forecasted transaction are initially reported as a component of comprehensive income and, subsequently, reclassified into earnings when the forecasted transaction affects earnings. Gains and losses on all other forms of derivatives are recognized in earnings in the period of change. The Company will adopt FAS 133 effective July 1, 2000. The Company's management does not believe that the adoption of FAS 133 will have a significant impact on the Company's financial statements.

Revenue recognition - In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements". SAB 101 is to be implemented no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. Based on a review of SAB 101 to date, the Company's management does not believe that the interpretations will materially affect the Company's current revenue recognition policies, and thus will not have a significant impact on its future results of operations or financial position.

Accounting for Certain Transactions Involving Stock Compensation - In March 2000, the Financial Accounting Standards Board issued FIN 44, "Accounting for Certain Transactions Involving Stock Compensation - An Interpretation of APB Opinion No. 25". FIN 44 clarifies the application of APB 25 for only certain issues and is effective July 1, 2000. The Company's management does not believe that applying these interpretations will have a significant impact on the Company's financial statements.

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.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

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

During the first quarter of fiscal 2000, the Company entered into an interest rate swap agreement, with a maturity of December 26, 2003, to manage its exposure to interest rate movements by effectively converting a portion of its long-term note payable from fixed to variable rates. The notional amount of the interest rate swap subject to variable rates as of June 30, 2000 was $4,160,000 which decreases as payments are made on the long-term note payable. Under this agreement, the Company has contracted to pay a variable rate equal to LIBOR plus 2.43% (9.07% at June 30, 2000) and receive a fixed rate of 8.125%. The fair value of the swap agreement approximated ($89,173) at June 30, 2000. This amount approximates the present value of the difference between estimated future variable-rate payments and fixed-rate receipts and represents the amount the Company would have to pay to terminate the swap. This amount has not been recognized in the consolidated financial statements, since it is accounted for as a hedge and the Company has no present intention of terminating the swap prior to the maturity date of the note payable.

-12-

Although the Company entered into the Swap Agreement to reduce its exposure to changes in interest rates, a sharp rise in interest rates could materially adversely affect the financial condition and results of operations of the Company. Under the Swap Agreement, for each one percent (1%) incremental increase in LIBOR, the Company's annualized interest expense would increase by approximately $42,000.

Item 8. Financial Statements and Supplementary Data

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

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

Not applicable.

-13-

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 2000 Annual Meeting of Stockholders, specifically the discussion under the headings "Election of Directors", "Nominees", "TSI Acquisition and Voting Agreement", "Executive Officers", and "Section 16(a) Beneficial Ownership Reporting Compliance". It is currently anticipated that the Proxy Statement will be publicly available and mailed to stockholders in October 2000.

Item 11. Executive Compensation

The discussion under "Director Compensation", "Board Compensation Committee Report on Executive Compensation", "Executive Compensation", "Option Exercises and Holdings", "Employee Stock Options", "Stock Performance Graph" and "Employment Contracts and Termination of Employment Arrangements" in the Company's Proxy Statement is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The discussion under "Security Ownership of Certain Beneficial Owners and Management" in the Company's Proxy Statement is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

The discussion under "Certain Relationships and Related Transactions" in the Company's Proxy Statement is incorporated herein by reference.

-14-

PART IV

Item 14. Exhibits, Financial Statements, Financial Statement Schedule 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. Financial Statement Schedule - The financial statement schedule listed in the "Index to Consolidated Financial Statements" described at F-1.

3. Exhibits - Refer to (c) below.

(b) Reports on Form 8-K

None

(c) Exhibits

  3.1  -   Certificate of Incorporation of the Company, filed as
           Exhibit 3 (a) (2) to the Company's Post Effective Amendment
           No. 1 to Form S-18 (File No. 33-33594-FW) and incorporated
           by reference herein.

  3.2 -    Certificate of Amendment of Certificate of Incorporation of
           the Company, dated March 24, 1992 and filed as Exhibit 4.2
           to the Company's Form S-8 (File No. 333-44337) and
           incorporated by reference herein.

  3.3 -    Amended and Restated Bylaws of the Company, filed as Exhibit
           3 (b) (2) to the Company's Post Effective Amendment No. 1 to
           Form S-8 (File No. 33-33594-FW) and incorporated by
           reference herein.

  4.1 -    Specimen Common Stock Certificate, filed as Exhibit 4.4 to
           the Company's Registration Statement on Form S-3 (File No.
           333-70823) and incorporated by reference herein.

  4.2 -    Rights Agreement, dated as of June 23, 1999, between
           Craftmade International, Inc. and Harris Trust and Savings
           Bank, as Rights Agent, previously filed as an exhibit to
           Form 8-K dated July 9, 1999 (File No. 000-26667) and
           incorporated by reference herein.

10.1  -    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 10Q 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 10Q 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 10Q 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
           10Q 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 10Q for the quarter ended December 31,
           1995, and herein incorporated by reference.

-15-

10.6  -    Revolving credit facility with Texas Commerce Bank,
           previously filed as an exhibit in Form 10K 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.

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

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

10.17 -    Fourth Amendment to Credit Agreement, dated April 2, 1999,
           by and among Craftmade International, Inc., a Delaware
           corporation, Durocraft International, Inc., a Texas
           corporation,

-16-

          Trade Source International, a Delaware corporation, Chase
          Bank of Texas, National Association and Frost National Bank,
          filed as Exhibit 10.17 to the Company's Quarterly Report on
          Form 10-Q filed May 15, 2000 (File No. 000-26667) and herein
          incorporated by reference.

10.18 -   Letter Agreement Concerning Fifth Amendment to Credit
          Agreement, dated August 11, 1999, from Chase Bank of Texas,
          N.A. and Frost National Bank to Craftmade International,
          Inc., Durocraft International Inc., Trade Source
          International, Inc., and C/D/R Incorporated, filed as
          Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q
          filed May 15, 2000 (File No. 000-26667) and herein
          incorporated by reference.

10.19 -   Sixth Amendment to Credit Agreement, dated November 12,
          1999, by and among Craftmade International, Inc., a Delaware
          corporation, Durocraft International, Inc., a Texas
          corporation, Trade Source International, Inc., a Delaware
          corporation, C/D/R Incorporated, a Delaware corporation,
          Chase Bank of Texas, National Association and Frost National
          Bank, filed as Exhibit 10.19 to the Company's Quarterly
          Report on Form 10-Q filed May 15, 2000 (File No. 000-26667)
          and herein incorporated by reference.

10.20 -   Employment Agreement dated October 25, 1999, between Kathy
          Oher and Craftmade International, Inc.

10.21 -   Seventh Amendment to Credit Agreement dated May 12, 2000, by
          and among Craftmade International, Inc., a Delaware
          corporation, Durocraft International, Inc., a Texas
          corporation, Trade Source International, Inc., a Delaware
          corporation, C/D/R Incorporated, a Delaware corporation,
          Chase Bank of Texas, National Association and Frost National
          Bank.

21    -   Subsidiaries of the Registrant.

27    -   Financial Data Schedule.

(d) All other 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.

-17-

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 26, 2000.

Craftmade 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.

Signatures                                  Capacity                                    Date
----------                                  --------                                    ----
/s/ James Ridings                           Chairman of the Board, President,           September 26, 2000
-------------------------------             Chief Executive Officer and
 James Ridings                              Director (Principal Executive
                                            Officer)


/s/ Clifford Crimmings                      Vice President Marketing and                September 26, 2000
-------------------------------             Director
 Clifford Crimmings


/s/ Kathy Oher                              Chief Financial Officer, Vice               September 26, 2000
-------------------------------             President and Director
 Kathy Oher                                 (Principal Financial and
                                            Accounting Officer)


/s/ Neall Humphrey                          President of Trade Source                   September 26, 2000
-------------------------------             International, Inc. and Director
Neall Humphrey


/s/ John DeBlois                            Executive Vice President of Trade           September 26, 2000
-------------------------------             Source International, Inc.
John DeBlois                                and Director


/s/ A. Paul Knuckley                        Director                                    September 26, 2000
-------------------------------
A. Paul Knuckley


/s/ Jerry E. Kimmel                         Director                                    September 26, 2000
-------------------------------
Jerry E. Kimmel


/s/ Lary Snodgrass                          Director                                    September 26, 2000
-------------------------------
Lary Snodgrass

-18-

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                                                 Page
                                                                                                 ----
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 Stockholders' Equity                                    F-8
   Notes to Consolidated Financial Statements                                                    F-9

FINANCIAL STATEMENT SCHEDULE:
       II - Valuation and Qualifying Accounts and Reserves                                       F-20

All other 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

REPORT OF INDEPENDENT ACCOUNTANTS

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

In our opinion, the consolidated financial statements listed in the accompanying 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, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2000, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index appearing on page F-1 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America 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 our opinion.

/s/ PricewaterhouseCoopers LLP


Fort Worth, Texas
August 15, 2000

F-2

CRAFTMADE INTERNATIONAL, INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

                                                    For the years ended June 30,
                                                ------------------------------------

                                                  2000          1999          1998
                                                --------      --------      --------
                                                (In thousands, except per share data)
Net sales                                       $ 85,499      $ 84,986      $ 40,903
Cost of goods sold                                55,640        54,691        24,578
                                                --------      --------      --------
Gross profit                                      29,859        30,295        16,325
Selling, general and administrative
    expenses                                      19,329        18,222        10,061
Depreciation and amortization                        874           805           493
                                                --------      --------      --------
Operating profit                                   9,656        11,268         5,771
Other (income) expense:
    Interest expense, net                          1,645         1,293         1,231
    Other, net                                        --            --          (240)
                                                --------      --------      --------
Income before income taxes
    and minority interest                          8,011         9,975         4,780
Provision for income taxes                         2,583         3,336         1,734
                                                --------      --------      --------
                                                   5,428         6,639         3,046

Minority interest                                 (1,148)         (950)           --
                                                --------      --------      --------

         Net income                             $  4,280      $  5,689      $  3,046
                                                ========      ========      ========

Basic and diluted earnings per common share     $    .63         $. 76      $    .46
                                                ========      ========      ========

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

F-3

CRAFTMADE INTERNATIONAL, INC. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

                                                  June 30,      June 30,
                                                    2000          1999
                                                  --------      --------
                                                      (In thousands)
Current assets:
   Cash                                           $  1,171      $  1,563
   Accounts receivable - net of allowance
       of $236,000 and $796,000, respectively       17,610        15,126
   Inventory                                        15,322        13,779
   Deferred income taxes                               462           441
   Prepaid expenses and other current assets           918         1,066
                                                  --------      --------

       Total current assets                         35,483        31,975
                                                  --------      --------

Property and equipment, at cost:
   Land                                              1,535         1,535
   Building                                          7,784         7,726
   Office furniture and equipment                    2,297         2,167
   Leasehold improvements                              257           231
                                                  --------      --------
                                                    11,873        11,659

Less: accumulated depreciation                      (2,410)       (1,968)
                                                  --------      --------

     Total property and equipment, net               9,463         9,691

Goodwill, net of accumulated amortization
   of $808,000 and $396,000, respectively            5,131         5,543
Other assets
                                                        24            48
                                                  --------      --------
     Total other assets                             14,618        15,282
                                                  --------      --------

                                                  $ 50,101      $ 47,257
                                                  ========      ========

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

F-4

CRAFTMADE INTERNATIONAL, INC. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

LIABILITIES AND STOCKHOLDERS' EQUITY

                                                             June 30,      June 30,
                                                               2000          1999
                                                             --------      --------
                                                                 (In thousands)
Current liabilities:
   Note payable - current                                    $    470      $    788
   Revolving lines of credit                                   17,600        11,950
   Accounts payable                                             4,179         4,174
   Commissions payable                                            422           344
   Income taxes payable                                            10           466
   Accrued Liabilities                                          1,540           966
                                                             --------      --------
       Total current liabilities                               24,221        18,668

Other non-current liabilities:
   Deferred income taxes                                           88            83
   Note payable - long term                                     8,588         4,677
   Minority interest                                              245           466
                                                             --------      --------
       Total liabilities                                       33,142        23,894
                                                             --------      --------

Stockholders' equity:
   Series A cumulative, convertible, callable preferred
    stock, $1.00 par value, 2,000,000 shares authorized;
    32,000 shares issued                                           32            32
   Common stock, $.01 par value, 15,000,000 shares                 93            93
    authorized 9,316,535 shares issued
   Additional paid-in capital                                  12,453        12,453
   Retained earnings                                           22,654        19,046
                                                             --------      --------
                                                               35,232        31,624
   Less: treasury stock, 3,116,177 and 1,917,677 common
    shares at cost, respectively,
    and 32,000 preferred shares at cost                       (18,273)       (8,261)
                                                             --------      --------
                                                               16,959        23,363
                                                             --------      --------
   Commitments and contingencies
    (Notes 12 and 13)                                        $ 50,101      $ 47,257
                                                             ========      ========

The accompanying notes are an integral part of these consolidated financial statement

F-5

CRAFTMADE INTERNATIONAL, INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                               For the years ended June 30,
                                                           ------------------------------------

                                                             2000          1999          1998
                                                           --------      --------      --------

                                                                     (In thousands)
Cash flows from operating activities:
Net income                                                 $  4,280      $  5,689      $  3,046
   Adjustments to reconcile net income to net
   cash provided by operating activities:
   Depreciation and amortization                                874           805           493
   Provision for bad debts                                      288           612           114
   Deferred income taxes                                        (16)           19            93
   Minority interest                                          1,148           950            --
Change in assets and liabilities
   providing (using) cash:
   Accounts receivable                                       (2,773)       (1,102)          (76)
   Inventory                                                 (1,543)         (590)        1,417
   Prepaid expenses and other current assets                    172           (66)          308
   Accounts and commissions payable                              83          (321)          (12)
   Income taxes payable                                        (436)         (273)          163
   Accrued liabilities                                          575           196            50
                                                           --------      --------      --------
Net cash provided by operating activities                     2,652         5,919         5,596
                                                           --------      --------      --------

Cash flows from investing activities:
   TSI acquisition                                               --        (2,041)           --
   Additions to property and equipment                         (234)         (433)          (95)
                                                           --------      --------      --------
Net cash used for investing activities                         (234)       (2,474)          (95)
                                                           --------      --------      --------
Cash flows from financing activities:
   Principal payments on note payable                          (723)       (1,329)       (1,763)
   Proceeds from additional borrowings on note payable        4,316            --            --
   Net proceeds from (payments to) lines of credit            5,650         2,179        (3,000)
   Stock repurchase                                         (10,012)       (2,548)         (244)
   Distribution to minority interest members                 (1,369)         (614)           --
   Cash dividends                                              (672)         (556)         (320)
   Proceeds from exercise of employee stock options              --            61           136
                                                           --------      --------      --------
Net cash used for financing activities                       (2,810)       (2,807)       (5,191)
                                                           --------      --------      --------

Net increase (decrease) in cash                                (392)          638           310
Cash at beginning of year                                     1,563           925           615
                                                           --------      --------      --------
Cash at end of year                                        $  1,171      $  1,563      $    925
                                                           ========      ========      ========

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

F-6

CRAFTMADE INTERNATIONAL, INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Supplemental disclosures of cash flow
information:

                                   For the years ended June 30,
                                   ----------------------------
                                    2000       1999       1998
                                   ------     ------     ------
                                          (In thousands)
Cash paid during the year for:
   Interest                        $1,685     $1,349     $1,239
                                   ======     ======     ======
   Income taxes                    $3,009     $3,400     $1,440
                                   ======     ======     ======

Supplemental disclosures of non-cash investing activities:

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

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

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

F-7

CRAFTMADE INTERNATIONAL, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED JUNE 30, 2000

                                                               Series A   ADDITIONAL
                                                              Preferred    PAID-IN    RETAINED
                                       VOTING COMMON STOCK      Stock      CAPITAL    EARNINGS      TREASURY STOCK
                                       --------------------    --------   ----------  --------    --------------------
(In thousands)
                                        Shares     Amount                                          Shares      Amount       Total
                                       --------    --------                                       --------    --------    --------
Balance as of June 30, 1997               4,111    $     41    $     32   $  7,095    $ 11,187       1,211    $( 7,635)   $ 10,720

Stock repurchase                             --          --          --         --          --          32        (244)       (244)
Exercise of employee stock options           31          --          --        136          --          --          --         136
Cash dividends                               --          --          --         --        (320)         --          --        (320)
Stock split                               2,055          21          --        (21)         --         605          --          --
Net income for the year ended
         June 30, 1998                       --          --          --         --       3,046          --          --       3,046
                                       --------    --------    --------   --------    --------    --------    --------    --------
Balance as of June 30, 1998               6,197          62          32      7,210      13,913       1,848      (7,879)     13,338

TSI Acquisition                              --          --          --      5,213          --        (656)      2,166       7,379
Stock repurchase                             --          --          --         --          --         178      (2,548)     (2,548)
Exercise of employee stock options           21          --          --         61          --          --          --          61
Cash dividends                               --          --          --         --        (556)         --          --        (556)
Stock split                               3,099          31          --        (31)         --         580          --
Net income for the year ended
         June 30, 1999                       --          --          --         --       5,689          --          --       5,689
                                       --------    --------    --------   --------    --------    --------    --------    --------
Balance as of June 30, 1999               9,317          93          32     12,453      19,046       1,950      (8,261)     23,363

Stock repurchase                             --          --          --         --          --       1,198     (10,012)    (10,012)
Cash dividends                                                                            (672)                               (672)
Net income for the year ended
         June 30, 2000                       --          --          --         --       4,280          --          --       4,280
                                       --------    --------    --------   --------    --------    --------    --------    --------
Balance as of June 30, 2000               9,317    $     93    $     32   $ 12,453    $ 22,654       3,148    $(18,273)   $ 16,959
                                       ========    ========    ========   ========    ========    ========    ========    ========

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

F-8

CRAFTMADE INTERNATIONAL, INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND NATURE OF THE COMPANY

Craftmade International, Inc., a Delaware corporation ("Craftmade") and its subsidiaries (collectively referred to as the "Company"), are principally engaged in the design and distribution of ceiling fans, light kits, outdoor lighting, bathstrip lighting and related accessories. Craftmade markets these products to a nationwide network of lighting showrooms specializing in sales to the remodeling, replacement and new home construction markets. Craftmade also assembles and markets a variety of lamp styles for sale to certain major retail chains and catalog houses and distributes a variety of cables and components for the telephone and communications industries. Trade Source International, Inc. ("TSI"), a wholly-owned subsidiary acquired by the Company July 1, 1998 and two 50% owned companies (Prime/Home Impressions, LLC and Design Trends, LLC) market lighting and fan accessories to mass merchandisers.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION - The Company's consolidated financial statements include the accounts of all wholly-owned subsidiaries as well as the accounts of its two 50% owned companies. The operations of the 50% owned companies are consolidated because the Company is able to control the operations of the entities through contractual arrangement and has the majority representation on the entity's Board of Directors or is the sole manager of the entity. The non-Company owned interest in each entity is reflected as minority interest in the accompanying consolidated financial statements. Distributions to minority interests are limited to their proportionate interest in the earnings of each entity.

All intercompany accounts and transactions have been eliminated. The functional currency of the Company's foreign subsidiaries is the United States dollar.

CONCENTRATION OF CREDIT RISK - Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade receivables. Substantially all of Craftmade's customers are lighting showrooms; however, credit risk is limited due to the large number of customers and their dispersion across many different geographic locations. As of June 30, 2000, Craftmade had no significant concentration of credit risk. The customer base of TSI consists entirely of mass merchandisers, with approximately 48% and 25% of its sales for the year ended June 30, 2000 to two customers, (19% and 10% of consolidated sales, respectively). Sales to these two customers totaled 47% and 29% of TSI's sales for the year ended June 30, 1999 (20% and 13% of consolidated sales, respectively).

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, as follows:

Building                                40 years
Office furniture and equipment          5 to 7 years.

Leasehold improvements are amortized over the life of the lease or its useful life, whichever is shorter.

Depreciation and amortization expense for the years ended June 30, 2000, 1999 and 1998 approximated $461,000, $409,000 and $321,000, respectively.

F-9

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 Craftmade's acquisition of TSI is being amortized using the straight-line method over 15 years. Accordingly, goodwill amortization of $412,000 and $396,000 for the years ended June 30, 2000 and 1999, respectively, has been recorded in the accompanying consolidated statements of income.

Goodwill related to Craftmade's acquisition of DMI Products, Inc. in 1990 was being amortized using the straight-line method over 10 years. During the year ended June 30, 1998, Craftmade determined that events had made recovery of the goodwill unlikely; thus, pursuant to its impairment policy of long-lived assets described below, the remaining balance of $172,000 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.

REVENUE RECOGNITION - The Company recognizes revenue upon shipment of product to customers. In March 2000, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements". The Company will adopt SAB 101 during the fourth quarter of fiscal 2001; however, based on a review of SAB 101 to date, the Company's management does not believe that the interpretations will materially affect the Company's current revenue recognition policies, and thus will not have a significant impact on its future results of operations or financial position.

ADVERTISING COST - The Company's advertising expenditures consist primarily of print advertising and vendor cooperative advertising programs, and are expensed as incurred. Advertising expense for the years ended June 30, 2000, 1999, and 1998 was $1,630,000, $1,722,000, and $578,000, respectively. Prepaid advertising costs at June 30, 2000 and 1999 were $223,000 and $300,000, respectively. Prepaid advertising costs will be reflected as an expense during the quarterly period used.

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. Income taxes have been provided on unremitted earnings from foreign subsidiaries. The Company reviews its deferred tax assets for ultimate realization and will record a valuation allowance to reduce the deferred tax asset if it is more likely than not that some portion, or all, of these deferred tax assets will not be realized.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - The Company accounts for the interest rate swap entered during the year ended June 30, 2000 as a hedge of fixed rate debt and interest rate differentials paid or received under this agreement are recognized as adjustments to interest expense. Gains or losses on terminated swaps will be recognized over the remaining life of the underlying obligation as an adjustment to interest expense. See Note 6 - Derivative Instruments and Hedging Activities.

In June 1998, the Financial Accounting Standards Board issued FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". FAS 133 requires that derivative instruments be measured at fair value and recognized in the balance sheet as either assets or liabilities, as the case may be. Gains and losses on derivatives designated as hedges against the cash flow effect of a forecasted transaction are initially reported as a component of comprehensive income and, subsequently, reclassified into earnings when the forecasted transaction affects earnings. Gains and losses on all other forms of derivatives are recognized in earnings in the period of change. The Company will adopt FAS 133 effective July 1, 2000. The Company's management does not believe that the adoption of FAS 133 will have a significant impact on the Company's financial statements.

F-10

STOCK-BASED COMPENSATION - The Company follows the disclosure only provisions of FAS 123, "Accounting for Stock-Based Compensation". However, 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". In March 2000, the Financial Accounting Standards Board issued FIN 44, "Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of APB Opinion No. 25". FIN 44 clarifies the application of APB 25 for certain issues and is effective July 1, 2000. The Company's management does not believe that applying these interpretations will have a significant impact on the Company's financial statements.

EARNINGS PER COMMON SHARE AND STOCK SPLIT - Basic earnings per share measures the performance of an entity over the reporting period. Diluted earnings per share measures the performance of an entity over the reporting period while giving effect to all potentially dilutive common shares that were outstanding during the period. The treasury stock method is used to determine the dilutive potential of 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 earnings per share calculations due to their anti-dilutive nature.

All references to the number of common shares and per common share amounts have been restated to give retroactive effect to the three-for-two stock splits effected in the form of a 50% stock dividend declared by the Board of Directors on September 30, 1998 and September 26, 1997 for all periods presented.

SEGMENT INFORMATION - The Company presents two reportable segments, Craftmade and TSI. The Company's reportable segments have been identified utilizing the management approach which designates the internal organization that is used by management for making operating decisions and assessing performance.

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

RECLASSIFICATIONS - Certain amounts for the years ended June 30, 1999 and 1998 have been reclassified to conform with the current year presentation.

NOTE 3 - TSI ACQUISITION

Effective July 1, 1998, Craftmade entered into an agreement and plan of merger with Trade Source International, Inc., a California corporation ("TSI California"). The total purchase price was $11,000,000, paid in a combination of $3,621,000 cash and 983,861 shares of Craftmade's common stock, valued at $7,379,000. This transaction has been accounted for under the purchase method of accounting and the results of operations of TSI have been consolidated beginning July 1, 1998. The excess of the purchase price over the estimated fair value of the acquired net assets of $5,939,000 has been recorded as goodwill and is being amortized over 15 years.

Unaudited pro forma results of operations, as if the acquisition had occurred at the beginning of fiscal 1998, is as follows (in thousands, except per share data):

                                               Year ended
                                             June 30, 1998
                                             -------------
Net sales                                       $72,387
Net income                                        3,739
Basic and diluted earnings per common share         .74

F-11

NOTE 4 - REVOLVING LINES OF CREDIT

At June 30, 2000, the Company has a $19,000,000 line of credit with a financial institution at an interest rate of prime less .5% (9% at June 30, 2000), of which $15,600,000 was outstanding. The line of credit is due on demand; however, if no demand is made, it is scheduled to mature November 30, 2001. This line of credit is collateralized by inventory, accounts receivable and equipment of the Company, excluding PHI.

In addition, PHI has a $3,000,000 line of credit with a financial institution at an interest rate of the one-month LIBOR plus 2% (8.64% at June 30, 2000), of which $2,000,000 was outstanding at June 30, 2000. The line of credit is due on demand; however, if no demand is made, it is scheduled to mature February 23, 2001. This line of credit is collateralized by inventory and accounts receivable of PHI.

The lines of credit contain certain financial covenants, which include tangible net worth, funded debt to EBITDA ratio, capital expenditures and common stock repurchases. The Company has complied with the covenants or obtained waivers for any events of default as of and for the year ended June 30, 2000. Management believes that it is probable the Company will be in compliance with all covenants at applicable measurement dates prior to maturity. Management believes that the Company will be able to renew these lines of credit or obtain similar funding from another institution upon their maturity.

NOTE 5 - NOTE PAYABLE

Craftmade has a recourse term loan to finance its home office and warehouse. During the year ended June 30, 2000, the Company increased the borrowings to the original principal balance of $9,200,000. The interest rate was increased from 8.125% to 8.302%. The loan is payable in equal monthly installments of principal and interest of $100,378 with a final balloon payment of $4,371,135 when the loan matures on January 1, 2008. The loan is collateralized by the building and land.

Scheduled maturities of the note payable are as follows (in thousands):

Fiscal Year
-----------
   2001                        $  470
   2002                           511
   2003                           555
   2004                           603
   2005                           654
Thereafter                      6,265
                               ------
                               $9,058
                               ======

NOTE 6 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

During the first quarter of fiscal 2000, the Company entered into an interest rate swap agreement, with a maturity of December 26, 2003, to manage its exposure to interest rate movements by effectively converting a portion of its long-term note payable from fixed to variable rates. The notional amount of the interest rate swap subject to variable rates as of June 30, 2000 was $4,160,000 which decreases as payments are made on the long-term note payable. Under this agreement, the Company has contracted to pay a variable rate equal to LIBOR plus 2.43% (9.07% at June 30, 2000) and receive a fixed rate of 8.125%. The fair value of the swap agreement approximated ($89,173) at June 30, 2000. This amount approximates the present value of the difference between estimated future variable-rate payments and fixed-rate receipts and represents the amount the Company would have to pay to terminate the swap. This amount has not been recognized in the consolidated financial statements, since it is accounted for as a hedge and the Company has no present intention of terminating the swap prior to the maturity date of the note payable.

F-12

NOTE 7 - INCOME TAXES

Components of the provision for income taxes for the years ended June 30, 2000, 1999 and 1998 consist of the following:

                                       2000        1999         1998
                                     -------      -------     -------
                                              (In thousands)
Current expense:
         Federal                     $ 2,270      $ 2,904     $ 1,573
         State                           142          188          67
         Foreign                         187          225          --
                                     -------      -------     -------
Total current expense                  2,599        3,317       1,640

Total deferred (benefit) expense         (16)          19          94
                                     -------      -------     -------

Provision for income taxes           $ 2,583      $ 3,336     $ 1,734
                                     =======      =======     =======

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, 2000 and 1999 are as follows:

                                   2000        1999
                                   -----      -----
                                    (In thousands)

Inventory                          $ 316      $ 429
Accounts receivable reserves          80         94
Vendor program accruals              316        184
Other                                 85         76
                                   -----      -----
Total deferred tax assets            797        783
                                   -----      -----
Depreciation                         (95)       (91)
Foreign taxes                       (328)      (334)
                                   -----      -----
Total deferred tax liabilities      (423)      (425)
                                   -----      -----
                                   $ 374      $ 358
                                   =====      =====

The differences between the Company's effective tax rate and the federal statutory rate of 34% for the years ended June 30, 2000, 1999 and 1998 are as follows:

                                                              2000          1999         1998
                                                            -------       -------       -------
                                                                      (In thousands)
Tax at the statutory corporate rate                         $ 2,723       $ 3,392       $ 1,625
Minority interest at the statutory corporate rate              (390)         (323)           --
State income taxes, net of federal benefit                       94           124            45
Goodwill                                                        140           135            --
Other                                                            16             8            64
                                                            -------       -------       -------
Provision for income taxes                                  $ 2,583       $ 3,336       $ 1,734
                                                            =======       =======       =======

Effective tax rate (excluding minority interest income)          38%           37%           36%
                                                            =======       =======       =======

F-13

NOTE 8 - STOCKHOLDERS' EQUITY

EMPLOYEE STOCK OPTION PLANS

On December 31, 1992, the Company granted to two key employees options to purchase an aggregate of 67,500 shares of common stock of the Company at the average market value of common stock at date of grant. 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. During the years ended June 30, 1999 and 1998, 21,000 and 46,500 options, respectively, were exercised.

STOCK REPURCHASE

During the years ended June 30, 2000 and 1999, the Company's Board of Directors authorized the Company's management to repurchase up to 2,350,000 shares of the Company's outstanding common stock. At June 30, 2000 and 1999, the Company had repurchased 1,198,500 and 177,500 shares, respectively, at an aggregate cost of $10,012,000 and $2,548,000, respectively, related to these plans.

STOCKHOLDER RIGHTS PLAN

On June 23, 1999, the Company declared a dividend of one Preferred Share Purchase Right ("Right") on each outstanding share of the Company's common stock. The dividend distribution was made on July 19, 1999 to stockholders of record on that date. The Rights become exercisable if a person or group acquires 15% or more of the Company's common stock or announces its intent to do so. Each Right will entitle stockholders to buy one one-thousandth of a share of Series A Preferred Stock, $1.00 par value per share, at an exercise price of $48. When the Rights become exercisable, the holder of each Right (other than the acquiring person or members of such group) is entitled (1) to purchase, at the Right's then current exercise price, a number of the acquiring company's common shares having a market value of twice such price, (2) to purchase, at the Right's then current exercise price, a number of the Company's common shares having a market value of twice such price, or (3) at the option of the Company, to exchange the Rights (other than Rights owned by such person or group), in whole or in part, at an exchange ratio of one-half share of common stock (or one-thousandth of a share of the Series A Preferred Stock) per Right. The Rights may be redeemed for $.001 each by the Company at any time prior to acquisition by a person (or group) of beneficial ownership of 15% or more of the Company's common stock. The Rights will expire on June 23, 2009.

F-14

NOTE 9 - EARNINGS PER SHARE

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

                              For the years ended June 30,
                              ----------------------------
                               2000       1999       1998
                              ------     ------     ------
                          (In thousands, except per share data)
Basic and diluted EPS:

Numerator: net income         $4,280     $5,689     $3,046
                              ------     ------     ------
Basic denominator:
Common shares outstanding      6,781      7,523      6,544
                              ------     ------     ------

Basic EPS:                    $  .63     $  .76     $  .46
                              ======     ======     ======

Diluted denominator:
Common shares outstanding      6,781      7,523      6,544
Options                           --         12         13
                              ------     ------     ------
Total shares                   6,781      7,535      6,557
                              ------     ------     ------

Diluted EPS:                  $  .63     $  .76     $  .46
                              ======     ======     ======

NOTE 10 - SIGNIFICANT FOURTH QUARTER ADJUSTMENTS

During the fourth quarter of fiscal 1999, TSI charged to expense $427,000 for the uncollectibility of an accounts receivable balance from one of its customers that filed bankruptcy. This amount is included in selling, general and administrative expenses in the accompanying consolidated statements of income for the year ended June 30, 1999. In addition, during the fourth quarter of fiscal 1999, the Company recognized $300,000 in inventory related adjustments. The adjustments included the recording of an additional $150,000 reserve for lamp inventory of the Craftmade segment and a $150,000 adjustment to inventory acquired in the TSI acquisition. The adjustments were required to reflect inventory at the lower of cost or market. Inventory reserve adjustments are reflected as a component of cost of goods sold in the accompanying consolidated statements of income.

NOTE 11 - 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, 2000 because of their short-term nature, recent renegotiations and/or variable interest rates.

F-15

NOTE 12 - COMMITMENTS

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 $269,000, $249,000, and $40,000 for the years ended June 30, 2000, 1999, and 1998, respectively. Future minimum lease payments under noncancelable operating leases as of June 30, 2000 are as follows (in thousands):

Fiscal Year
-----------
     2001      $261
     2002       143
     2003        96
     2004        47
               ----
               $547
               ====

TSI leases office space from an employee of TSI, who previously had been a principal stockholder of TSI's predecessor company. This lease is for $4,500 per month and expires June 30, 2001.

NOTE 13 - CONTINGENCIES

From time to time the Company is involved in certain legal actions and claims arising in the ordinary course of business. It is the opinion of management based on the advice of legal counsel and after consideration of the Company's insurance coverage that there is no such litigation or claim that when resolved will have a material effect on the Company's financial position or results of operations.

Craftmade 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 Craftmade's relationship with its major supplier of such fans, the supplier has extended Craftmade full credit for all product returns. Accordingly, no reserve for warranty has been accrued in the accompanying consolidated financial statements. Should Craftmade's relationship change in the future with respect to such supplier, Craftmade 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 Craftmade's operations.

NOTE 14 - 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 $10,000. 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, 2000, 1999 and 1998 aggregated approximately $92,000, $54,000, and $46,000, respectively.

NOTE 15 - MAJOR SUPPLIER AND RELATED PARTY

On December 7, 1989, Craftmade 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 ceiling fans for Craftmade. The Supplier provides substantially all of Craftmade's ceiling fans and accessories. 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 Craftmade by the Supplier account for approximately 71%, 87%, and 90%, of Craftmade's purchases (37%, 41%, and 90% of consolidated purchases) during

F-16

the years ended June 30, 2000, 1999 and 1998, respectively. As of June 30, 2000, the Supplier owned 227,691 shares of the Company's common stock, representing 3.7% of outstanding common stock. The Company, at its option, may repurchase the shares for an aggregate purchase price of $138,000. At June 30, 2000 and 1999 the fair value of the option approximated $1,537,000 and $2,960,000, respectively.

NOTE 16 - SEGMENT INFORMATION

The Company presents two reportable segments, Craftmade and TSI. The accounting policies of the segments are the same as those described in Note 2 - Summary of Significant Accounting Policies. The Company evaluates the performance of its segments and allocates resources to them based on their operating profit and loss and cash flows.

The Company is organized on a combination of product type and customer base. The Craftmade segment primarily derives its revenue from home furnishings including ceiling fans, light kits, bathstrip lighting and lamps offered through lighting showrooms, certain major retail chains and catalog houses. The TSI segment derives its revenue from lighting and fan accessories marketed solely to mass merchandisers.

F-17

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

                                     Craftmade      TSI        Total
                                     ---------      ---        -----
For the year ended June 30, 2000:
---------------------------------
Net sales to external customers       $50,560     $34,939     $85,499

Operating profit                        7,409       2,247       9,656

Net interest expense                    1,519         126       1,645

Minority interest                          --       1,148       1,148

Provision for income taxes              2,099         484       2,583

Depreciation and amortization             381         493         874

Assets                                 29,678      20,423      50,101

For the year ended June 30, 1999:
---------------------------------
Net sales to external customers       $47,726     $37,260     $84,986

Operating profit                        8,034       3,234      11,268

Net interest expense                    1,180         113       1,293

Minority interest                          --         950         950

Provision for income taxes              2,414         922       3,336

Depreciation and amortization             350         455         805

Assets                                 30,301      16,956      47,257

For the year ended June 30, 1998:
---------------------------------
Net sales to external customers       $40,903     $    --     $40,903

Operating profit                        5,771          --       5,771

Net interest expense                    1,231          --       1,231

Provision for income taxes              1,734          --       1,734

Depreciation and amortization             493          --         493

Assets                                 28,350          --      28,350

The following is sales information by geographic area for the years ended June 30, 2000, 1999 and 1998 (in thousands):

                    2000        1999        1998
                  -------     -------     -------
United States     $79,139     $75,723     $40,903
Foreign             6,360       9,263          --
                  -------     -------     -------
                  $85,499     $84,986     $40,903
                  =======     =======     =======

F-18

Foreign revenue is based on the country in which the legal subsidiary is domiciled, which for the years ended June 30, 2000 and 1999 is Hong Kong.

Long-lived assets totaled approximately $9,463,000 and $9,691,000 at June 30, 2000 and 1999, respectively. Approximately $73,000 and $61,000 of the long-lived assets at June 30, 2000 and 1999, respectively, are located in Hong Kong.

F-19

CRAFTMADE INTERNATIONAL, INC. AND ITS SUBSIDIARIES

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

                                                                   Additions
                                                    --------------------------------------
                                     Balance at            (1)                 (2)                           Balance at
                                    beginning of    Charged to costs    Charged to other     Deductions        end of
Description                            period          and expense     accounts (describe) (describe)(a)       period
--------------------------------    ------------    ----------------   ------------------- -------------     ----------

Allowance for doubtful accounts:
--------------------------------
  For the years ended:
     June 30, 2000                   $      796        $      288             --                   (848)      $     236
     June 30, 1999                          200               612             --                    (16)            796
     June 30, 1998                          275               114             --                   (189)            200

(a) Reduction of the allowance for doubtful accounts associated with the write-off of certain uncollectible accounts receivable balances.

F-20

INDEX TO EXHIBITS

EXHIBIT
NUMBER         DESCRIPTION
------         -----------
    3.1   -    Certificate of Incorporation of the Company, filed as Exhibit 3 (a) (2) to the Company's Post Effective Amendment No.
               1 to Form S-18 (File No. 33-33594-FW) and incorporated by reference herein.

    3.2   -    Certificate of Amendment of Certificate of Incorporation of the Company, dated March 24, 1992 and filed as Exhibit
               4.2 to the Company's Form S-8 (File No. 333-44337) and incorporated by reference herein.

    3.3   -    Amended and Restated Bylaws of the Company, filed as Exhibit 3 (b) (2) to the Company's Post Effective Amendment No.
               1 to Form S-8 (File No. 33-33594-FW) and incorporated by reference herein.

    4.1   -    Specimen Common Stock Certificate, filed as Exhibit 4.4 to the Company's Registration Statement on Form S-3 (File No.
               333-70823) and incorporated by reference herein.

    4.2   -    Rights Agreement, dated as of June 23, 1999, between Craftmade International, Inc. and Harris Trust and Savings Bank,
               as Rights Agent, previously filed as an exhibit to Form 8-K dated July 9, 1999 (File No. 000-26667) and incorporated
               by reference herein.

   10.1   -    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 10Q 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 10Q 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 10Q 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 10Q 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 10Q 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 10K 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  -    Employment Agreement, dated July 1, 1998, by and among Craftmade International, Inc., Trade Source International,
            Inc., a Delaware corporation Neall an Leslie Humphrey and John DeBlois, filed as Exhibit 2.1 to the Company's Current
            Report on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and herein incorporated by reference.

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

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

10.17  -    Fourth Amendment to Credit Agreement, dated April 2, 1999, by and among Craftmade International, Inc., a Delaware
            corporation, Durocraft International, Inc. a Texas corporation, Trade Source International, a Delaware corporation,
            Chase Bank of Texas, National Association and Frost National Bank, filed as Exhibit 10.17 to the Company's Quarterly
            Report on Form 10-Q filed May 15, 2000 (File No. 000-26667) and herein incorporated by reference.

10.18  -    Letter Agreement Concerning Fifth Amendment to Credit Agreement, dated August 11, 1999, from Chase Bank of Texas,
            N.A. and Frost National Bank to Craftmade International, Inc., Durocraft International Inc., Trade Source
            International, Inc., and C/D/R Incorporated, filed as Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q
            filed May 15, 2000 (File No. 000-26667) and herein incorporated by reference.

10.19  -    Sixth Amendment to Credit Agreement, dated November 12, 1999, by and among Craftmade International, Inc., a Delaware
            corporation, Durocraft International, Inc., a Texas corporation, Trade Source International, Inc., a Delaware
            corporation, C/D/R Incorporated, a Delaware corporation, Chase Bank of Texas, National Association and Frost National
            Bank, filed as Exhibit 10.19 to the Company's Quarterly Report on Form 10-Q filed May 15, 2000 (File No. 000-26667)
            and herein incorporated by reference.


10.20  -    Employment Agreement dated October 25, 1999, between Kathy Oher and Craftmade International, Inc.

10.21  -    Seventh Amendment to Credit Agreement dated May 12, 2000, by and among Craftmade International, Inc., a Delaware
            corporation, Durocraft International, Inc., a Texas corporation, Trade Source International, Inc., a Delaware
            corporation, C/D/R Incorporated, a Delaware corporation, Chase Bank of Texas, National Association and Frost National
            Bank.

21     -    Subsidiaries of the Registrant.

27     -    Financial Data Schedule.


EXHIBIT 10.20

EMPLOYMENT AGREEMENT

This Employment Agreement (this "Agreement") is made as of October 5, 1999, to be effective as of October 25, 1999 (the "Effective Date"), by Kathleen Brown Oher, an individual resident in Dallas County, Texas (the "Executive") and Craftmade International, Inc., a Delaware corporation ("Craftmade").

RECITALS

This Agreement provides for the employment of Executive as Chief Financial Officer of Craftmade upon the terms and subject to the conditions set forth herein.

AGREEMENT

The parties, intending to be legally bound, agree as follows:

ARTICLE I

DEFINITIONS

For the purposes of this Agreement, the following terms have the meanings specified or referred to in this Article I.

"Basic Compensation"--Salary and Benefits.

"Board of Directors"--the board of directors of Craftmade.

"Change of Control"--

(a) there shall be consummated any consolidation or merger of Craftmade into or with another corporation or other legal person, and as a result of such consolidation or merger less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transactions are held in the aggregate by holders of Voting Stock (as defined in subsection (d) below) of Craftmade immediately prior to such transactions;

(b) any sale, lease, exchange or other transfer, whether in one transaction or any series of related transactions, of all or significant portions of the assets of Craftmade to any other corporation or other legal person, less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale, lease, exchange, or transfer is held in the aggregate by the holders of Voting Stock of Craftmade immediately prior to such sale, lease, exchange, or transfer;


(c) the shareholders of Craftmade approve any plan for the liquidation or dissolution of Craftmade;

(d) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), becomes, either directly or indirectly, the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities representing more than 50% of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of Craftmade ("Voting Stock"); or

(e) if at any time during a fiscal year a majority of the Board of Directors shall be replaced by persons who were not recommended for those positions by at least two-thirds of the directors of Craftmade who were directors of Craftmade at the beginning of the fiscal year.

Notwithstanding the preceding, a "Change of Control" shall not be deemed to have occurred with respect to any of the foregoing transactions conducted by any employee benefit plan (or related trust) sponsored or maintained by Craftmade, any corporation controlled by Craftmade, James Ridings, or any affiliate of James Ridings.

"Confidential Information"--information that is used in Craftmade's business and

(a) is proprietary to, about or created by Craftmade;

(b) gives Craftmade some competitive advantage, the opportunity of obtaining such advantage or the disclosure of which could be detrimental to the interests of Craftmade;

(c) is not typically disclosed to non-employees by Craftmade, or otherwise is treated as confidential by Craftmade; or

(d) is designated as Confidential Information by Craftmade or from all the relevant circumstances should reasonably be assumed by the Employee to be confidential to Craftmade.

Confidential Information shall not include information publicly known (other than as a result of a direct or indirect disclosure by the Executive). The phrase "publicly known" shall mean readily accessible to the public in a written publication.

"Employee Invention"--any idea, invention, technique, modification, process, or improvement (whether patentable or not), any industrial design (whether registerable or not) and any work of authorship (whether or not copyright protection may be obtained for it) created, conceived, or developed by the Executive, either solely or in conjunction with others, during the Employment Period, or a period that includes a portion of the Employment Period, that relates in any way to the business then being conducted or proposed to be conducted by Craftmade, and any such item created by the Executive, either solely or in conjunction with others, following termination of the Executive's employment with Craftmade, that is based upon or uses Confidential Information.

- 2 -

"Employment Period"--the term of the Executive's employment under this Agreement.

"Fiscal Year"--Craftmade's fiscal year, as it exists on the Effective Date or as changed from time to time.

"person"--any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, or governmental body.

"Post-Employment Period"--for purposes of Section 8.2, the two-year period beginning on the date of termination of the Executive's employment with Craftmade.

ARTICLE II

EMPLOYMENT TERMS AND DUTIES

2.1 Employment. Craftmade hereby employs the Executive commencing as of the Effective Date, and the Executive hereby accepts employment by Craftmade commencing as of the Effective Date, upon the terms and conditions set forth in this Agreement. All of Executive's rights shall be vested immediately upon the execution of this Agreement by the parties hereto.

2.2 Term. Subject to the provisions of Article VI, the term of the Executive's employment under this Agreement will initially be three years, beginning on the Effective Date and ending on the third anniversary of the Effective Date (the "Initial Term"). After the Initial Term, the Agreement shall be extended for two additional one-year terms (the "First Additional Term" and the "Second Additional Term," respectively), unless the Executive provides written notice of election not to renew at least 45 days before the commencement of the First Additional Term and the Second Additional Term, respectively.

2.3 Duties. The Executive will initially serve as Chief Financial Officer of Craftmade and will have such duties as are typically commensurate with such position, subject to the assignment or delegation of duties by the Board of Directors or Chief Executive Officer of Craftmade. The Executive will devote her entire business time, attention, skill, and energy exclusively to the business of Craftmade, will use her best efforts to promote the success of Craftmade's business, and will cooperate fully with the Board of Directors in the advancement of the best interests of Craftmade. Executive shall operate primarily out of Craftmade's executive office, currently situated in Coppell, Texas. If the Executive is elected as a director of Craftmade (although there can be no assurance that Executive shall at any time be nominated as a director of Craftmade), or as a director or officer of any of its affiliates, the Executive will fulfill her duties as such director or officer with the same compensation as is paid to the other directors that are employees of Craftmade, if any.

- 3 -

ARTICLE III

COMPENSATION

3.1 Basic Compensation.

(a) Salary. Commencing on the Effective Date, the Executive will be paid an annual salary of $156,000.00, subject to adjustment as provided below (the "Salary"), which will be payable in equal periodic installments according to Craftmade's customary payroll practices, but no less frequently than monthly. The Salary will be reviewed by the Board of Directors not less frequently than annually, and the Board of Directors, subject to its fiduciary obligations, shall provide for an increase in the Salary proportionate to that of Craftmade's Chief Executive Officer.

(b) Bonus. The Chief Executive Officer of Craftmade will review the performance of the Executive not less frequently than annually, and the Chief Executive Officer of Craftmade shall provide for an annual bonus to the Executive (the "Bonus") based on the performance of Craftmade; such standards for the performance of Craftmade shall be comparable to those standards established concerning the receipt of any bonus by the Chief Executive Officer of Craftmade with respect to the performance of Craftmade.

(c) Benefits. The Executive will, during the Employment Period, be entitled to such pension, profit sharing, life insurance, hospitalization, major medical, disability and other employee benefits as are provided to Craftmade's Chief Executive Officer, to the extent the Executive is eligible under the terms of any applicable benefit plan (collectively, the "Benefits").

3.2 Stock Options. The Executive shall be entitled to participate in any stock option plan, employee stock ownership plan or similar plan of Craftmade that is provided to Craftmade's Chief Executive Officer, to the extent the Executive is eligible under the terms of such plan; provided, however, that in the event that the Board of Directors of Craftmade shall adopt a stock option plan at any board of directors meeting after the execution of this Agreement and during the Employment Period, Executive shall be entitled to receive a grant of options to purchase 50,000 shares of Common Stock, $0.01 par value of Craftmade. Such stock options shall have an exercise price based on the price of the Common Stock at the time of approval by the Board of Directors of such stock option plan, which Craftmade shall use its best efforts to obtain, and shall vest over five years, in accordance with the terms of any such stock option plan. Accordingly, 20% of such stock options will be exercisable commencing upon the approval of the stockholders of Craftmade (which approval Craftmade shall seek at the annual meeting of the stockholders of Craftmade in October, 2000), and the remainder of the stock options shall be exercisable each year thereafter in 20% increments. In the event that the stockholders of Craftmade do not approve such stock option plan, the Executive shall be entitled to receive, in lieu of such options to purchase 50,000 shares of Common Stock, a one-time cash bonus of $25,000, which sum shall be payable on or before December 31, 2000.

- 4 -

ARTICLE IV

FACILITIES AND EXPENSES

Craftmade will furnish the Executive office space, equipment, supplies, and such other facilities and personnel as Craftmade deems necessary or appropriate for the performance of the Executive's duties under this Agreement. Craftmade will pay on behalf of the Executive (or reimburse the Executive for) reasonable expenses incurred by the Executive at the request of, or on behalf of, Craftmade in the performance of the Executive's duties pursuant to this Agreement, and in accordance with Craftmade's employment policies, including reasonable expenses incurred by the Executive in attending conventions, seminars, and other business meetings, in appropriate business entertainment activities, and for promotional expenses. The Executive must file expense reports with respect to such expenses in accordance with Craftmade's policies.

ARTICLE V

VACATIONS AND HOLIDAYS

The Executive will be entitled to the amount of paid vacation as is provided to the Chief Executive Officer of Craftmade, in accordance with the vacation policies of Craftmade in effect for its executive officers from time to time. Vacation must be taken by the Executive at such time or times as approved by the Chairman of the Board or Chief Executive Officer of Craftmade. The Executive will also be entitled to the paid holidays set forth in Craftmade's policies. Vacation days and holidays during any Fiscal Year that are not used by the Executive during such Fiscal Year may not be used in any subsequent Fiscal Year.

ARTICLE VI

TERMINATION

6.1 Events of Termination. The Employment Period, the Executive's Basic Compensation, the Executive's Bonus and any and all other rights of the Executive under this Agreement or otherwise as an employee of Craftmade will terminate (except as otherwise provided in this Article VI):

(a) upon the death of the Executive;

(b) upon the disability of the Executive (as defined in Section 6.2) immediately upon notice from either party to the other;

- 5 -

(c) upon termination of the Executive for Cause (as defined in Section 6.3), immediately upon notice from Craftmade to the Executive, or at such later time as such notice may specify;

(d) upon termination by the Executive for Good Reason (as defined in
Section 6.4) upon not less than thirty days' prior notice from the Executive to Craftmade;

(e) upon termination of the Executive without Cause; or

(f) upon termination by the Executive for other than Good Reason.

6.2 Definition of Disability. The Executive will be deemed to have a "disability" if, for physical or mental reasons, the Executive is unable to perform the Executive's duties under this Agreement for 120 consecutive days, or 180 days during any twelve month period, as determined in accordance with this
Section 6.2. The disability of the Executive will be determined by a medical doctor selected by written agreement of Craftmade and the Executive upon the request of either party by notice to the other. If Craftmade and the Executive cannot agree on the selection of a medical doctor, each of them will select a medical doctor and the two medical doctors will select a third medical doctor who will determine whether the Executive has a disability. The determination of the medical doctor selected under this Section 6.2 will be binding on both parties. The Executive must submit to a reasonable number of examinations by the medical doctor making the determination of disability under this Section 6.2, and the Executive hereby authorizes the disclosure and release to Craftmade of such determination and all supporting medical records. If the Executive is not legally competent, the Executive's legal guardian or duly authorized attorney-in-fact will act in the Executive's stead, under this Section 6.2, for the purposes of submitting the Executive to the examinations, and providing the authorization of disclosure, required under this Section 6.2.

6.3 Definition of "Cause". "Cause" means: (a) the Executive's material breach of this Agreement; (b) the Executive's failure to adhere to any material written Craftmade policy if the Executive has been given a reasonable opportunity to comply with such policy or cure her failure to comply (which reasonable opportunity must be granted during the ten-day period preceding termination of this Agreement); (c) the appropriation (or attempted appropriation) of a material business opportunity of Craftmade, including attempting to secure or securing any personal profit in connection with any transaction entered into on behalf of Craftmade; (d) the misappropriation (or attempted misappropriation) of any of Craftmade's funds or property; or (e) the conviction of or the entering of a guilty plea or plea of no contest with respect to, a felony or the equivalent thereof.

6.4 Definition of "Good Reason". The phrase "Good Reason" means any of the following: (a) Craftmade's or Craftmade's material breach of this Agreement;
(b) the assignment of the Executive without her consent to a position, responsibilities, or duties of a materially lesser status or degree of responsibility than her position, responsibilities, or duties at the Effective Date; or (c) the requirement by Craftmade that the Executive be based anywhere other than Craftmade's principal executive office in Coppell, Texas, without the Executive's consent; or (d) any material reduction in Benefits.

- 6 -

6.5 Termination Pay. Effective upon the termination of this Agreement, Craftmade will be obligated to pay the Executive (or, in the event of her death, her designated beneficiary as defined below) only such compensation as is provided in this Section 6.5, and in lieu of all other amounts and in settlement and complete release of (i) all claims the Executive may have against Craftmade or Craftmade, or any of its affiliates, arising out of or pursuant to this Agreement and (ii) all claims Craftmade or Craftmade may have against the Executive arising out of or pursuant to this Agreement. For purposes of this
Section 6.5, the Executive's designated beneficiary will be such individual beneficiary or trust, located at such address, as the Executive may designate by notice to Craftmade from time to time or, if the Executive fails to give notice to Craftmade of such a beneficiary, the Executive's estate. Notwithstanding the preceding sentence, Craftmade will have no duty, in any circumstances, to attempt to open an estate on behalf of the Executive, to determine whether any beneficiary designated by the Executive is alive or to ascertain the address of any such beneficiary, to determine the existence of any trust, to determine whether any person or entity purporting to act as the Executive's personal representative (or the trustee of a trust established by the Executive) is duly authorized to act in that capacity, or to locate or attempt to locate any beneficiary, personal representative, or trustee.

(a) Termination by the Executive for Good Reason or Termination by Craftmade Without Cause. If the Executive terminates this Agreement for Good Reason or if Craftmade terminates this Agreement without Cause, Craftmade will pay the Executive (i) the Executive's Salary for the remainder, if any, of the Initial Term, the First Additional Term or the Second Additional Term, as applicable, (ii) the value of any accrued but unpaid or unused vacation or sick leave for the calendar year and (iii) that portion of the Executive's Bonus, if any, for the Fiscal Year during which the termination is effective, prorated through the date of termination.

(b) Termination by Craftmade for Cause or Termination by the Executive Without Good Reason. If Craftmade terminates this Agreement for Cause or if the Executive terminates this Agreement for other than Good Reason, the Executive will be entitled to receive her Salary only through the date such termination is effective, but will not be entitled to any Bonus for the Fiscal Year during which such termination occurs or any subsequent Fiscal Year.

(c) Termination upon Disability. If this Agreement is terminated by either party as a result of the Executive's disability, as determined under
Section 6.2, Craftmade will pay the Executive her Salary through the remainder of the calendar month during which such termination is effective and the period until disability insurance benefits commence under the disability insurance coverage furnished by Craftmade to the Executive.

(d) Termination upon Death. If this Agreement is terminated because of the Executive's death, the Executive will be entitled to receive her Salary through the end of the calendar month in which her death occurs, and that part of the Executive's Bonus, if any, for the Fiscal Year during which her death occurs, prorated through the end of the calendar month during which her death occurs.

- 7 -

(e) Termination Following a Change of Control. Notwithstanding anything in this Section 6.5 to the contrary, if this Agreement is terminated by either party for any reason within twelve months of a Change of Control, (i) if such termination occurs during the Initial Term, then Craftmade will pay the Executive's Salary for the remainder of such Initial Term plus two times the Executive's Salary, (ii) if such termination occurs during the First Additional Term, then Craftmade will pay the Executive's Salary for the remainder of such First Additional Term plus an amount equal to the Executive's Salary, or (iii) if such termination occurs during the Second Additional Term, then Craftmade will pay the Executive's Salary for the remainder of such Second Additional Term.

If the Executive's employment is terminated for other than Cause or the Executive is removed from office or position with Craftmade in either case following commencement by one or more representatives of Craftmade of discussions (authorized by the Board of Directors or the Chief Executive Officer of Craftmade) with a third party that ultimately results in the occurrence of an event described in subsections (a), (b), (c), (d), or (e) of the definition of "Change of Control" (subject to the final paragraph of such definition) and such termination or removal occurs within the period commencing on the date such discussions are authorized and ending on the date that is twelve months from the consummation of such event, regardless of whether such third party is a party to such occurrence, then such termination or removal shall be deemed to constitute a termination following a Change of Control for the purposes of the first paragraph of this Section 6.5(e), and, for the purposes of this Agreement, the date of the authorization of such discussions shall be deemed to be the date of the Change of Control of Craftmade.

(f) Benefits. The Executive's accrual of, or participation in plans providing for, the Benefits will cease at the effective date of the termination of this Agreement, and the Executive will be entitled to accrued Benefits pursuant to such plans only as provided in such plans. Notwithstanding the preceding, the Executive shall be entitled to receive all accrued but unpaid salary, Benefits and vacation pay upon the termination of this Agreement.

ARTICLE VII

NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS

7.1 Acknowledgments by the Executive. The Executive acknowledges that
(a) during the Employment Period and as a part of her employment, the Executive will be afforded access to Confidential Information; (b) public disclosure of such Confidential Information could have an adverse effect on Craftmade and its business; (c) because the Executive possesses substantial technical expertise and skill with respect to Craftmade's business, Craftmade desires to obtain exclusive ownership of each Employee Invention, and Craftmade will be at a substantial competitive disadvantage if it fails to acquire exclusive ownership of each Employee Invention; and (d) the provisions of this Article VII are reasonable and necessary to prevent the improper use or disclosure of Confidential Information and to provide Craftmade with exclusive ownership of all Employee Inventions.

- 8 -

7.2 Agreements of the Executive. In consideration of the compensation and benefits to be paid or provided to the Executive by Craftmade under this Agreement, the Executive covenants as follows:

(a) Confidentiality.

(i) During and following the Employment Period, the Executive will hold in confidence the Confidential Information and will not disclose it to any person except (A) with the specific prior written consent of Craftmade, (B) as necessary to carry out the Executive's duties under this Agreement or (C) except as otherwise expressly permitted by the terms of this Agreement.

(ii) Any trade secrets of Craftmade will be entitled to all of the protections and benefits under applicable law. If any information that Craftmade deems to be a trade secret is found by a court of competent jurisdiction not to be a trade secret for purposes of this Agreement, such information will, nevertheless, be considered Confidential Information for purposes of this Agreement. The Executive hereby waives any requirement that Craftmade submit proof of the economic value of any trade secret or post a bond or other security.

(iii) None of the foregoing obligations and restrictions applies to any part of the Confidential Information that the Executive demonstrates was or became generally available to the public other than as a result of a direct or indirect disclosure by the Executive.

(iv) The Executive will not remove from Craftmade's premises (except to the extent such removal is for purposes of the performance of the Executive's duties at home or while traveling, or except as otherwise specifically authorized by Craftmade) any document, record, notebook, plan, model, component, device, or computer software or code, whether embodied in a disk or in any other form (collectively, the "Proprietary Items"). The Executive recognizes that, as between Craftmade and the Executive, all of the Proprietary Items, whether or not developed by the Executive, are the exclusive property of Craftmade. Upon termination of this Agreement by either party, or upon the request of Craftmade during the Employment Period, the Executive will return to Craftmade all of the Proprietary Items in the Executive's possession or subject to the Executive's control, and the Executive shall not retain any copies, abstracts, sketches, or other physical embodiment of any of the Proprietary Items.

(b) Employee Inventions. Each Employee Invention will belong exclusively to Craftmade. The Executive acknowledges that all of the Executive's writing, works of authorship, specially commissioned works and other Employee Inventions are works made for hire and the property of Craftmade, including any copyrights, patents or other intellectual property rights pertaining thereto. If it is determined that any such works are not works made for hire, the Executive hereby assigns to Craftmade all of the Executive's right, title, and interest, including all rights of copyright, patent and

- 9 -

other intellectual property rights, to or in such Employee Inventions. The Executive covenants that she will promptly:

(i) disclose to Craftmade in writing any Employee Invention;

(ii) assign to Craftmade or to a party designated by Craftmade, at Craftmade's request and without additional compensation, all of the Executive's right to the Employee Invention for the United States and all foreign jurisdictions;

(iii) execute and deliver to Craftmade such applications, assignments, and other documents as Craftmade may request in order to apply for and obtain patents or other registrations with respect to any Employee Invention in the United States and any foreign jurisdictions;

(iv) sign all other papers necessary to carry out the above obligations; and

(v) give testimony and render any other assistance in support of Craftmade's rights to any Employee Invention.

7.3 Disputes or Controversies. The Executive recognizes that should a dispute or controversy arising from or relating to this Agreement be submitted for adjudication to any court, arbitration panel, or other third party, the preservation of the secrecy of Confidential Information may be jeopardized. To the extent permitted by law, all pleadings, documents, testimony, and records relating to any such adjudication will be maintained in secrecy and will be available for inspection by Craftmade, the Executive, and their respective attorneys and experts, who will agree, in advance and in writing, to receive and maintain all such information in secrecy, except as may be limited by them in writing.

ARTICLE VIII

NON-COMPETITION AND NON-INTERFERENCE

8.1 Acknowledgments by the Executive. The Executive acknowledges that:
(a) the services to be performed by her under this Agreement are of a special, unique, unusual, extraordinary, and intellectual character; (b) Craftmade's business is international in scope and its products are marketed throughout the world; (c) Craftmade competes with other businesses that are or could be located in any part of the world; and (d) the provisions of this Article VIII are reasonable and necessary to protect Craftmade's business.

8.2 Covenants of the Executive. In consideration of the acknowledgments by the Executive, and in consideration of the compensation and benefits to be paid or provided to the Executive by Craftmade, the Executive covenants that she will not, directly or indirectly:

- 10 -

(a) during the Employment Period, except in the course of her employment hereunder, directly or indirectly, engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend the Executive's name or any similar name to, lend Executive's credit to or render services or advice to, any business whose products compete in whole or in part with the products or market areas of Craftmade; provided, however, that the Executive may purchase or otherwise acquire up to (but not more than) one percent of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Exchange Act;

(b) during the Post-Employment Period, directly or indirectly, engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend the Executive's name or any similar name to, lend Executive's credit to or render services or advice to, any business whose products compete in whole or in part with the product lines and the market areas utilized by Craftmade and Craftmade on the last day of the Employment Period; provided, however, that the Executive may purchase or otherwise acquire up to (but not more than) one percent of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Exchange Act;

(c) whether for the Executive's own account or for the account of any other person, at any time during the Employment Period and the Post-Employment Period, solicit business of the same product lines being carried by Craftmade in the same market areas as Craftmade, from any person known by the Executive to be a customer of Craftmade, whether or not the Executive had personal contact with such person during and by reason of the Executive's employment with Craftmade;

(d) whether for the Executive's own account or the account of any other person (i) at any time during the Employment Period and the Post-Employment Period, solicit, employ, or otherwise engage as an employee, independent contractor, or otherwise, any person who is an employee of Craftmade or in any manner induce or attempt to induce any employee of Craftmade to terminate her employment with Craftmade; or (ii) at any time during the Employment Period and the Post- Employment Period, interfere with Craftmade's relationship with any person, including any person who at any time during the Employment Period was an employee, contractor, supplier, or customer of Craftmade; or

(e) at any time during or after the Employment Period, disparage Craftmade or any of its shareholders, directors, officers, employees, or agents.

If any covenant in this Section 8.2 is held to be unreasonable, arbitrary, or against public policy, such covenant will be considered to be divisible with respect to scope, time, and geographic area, and such lesser scope, time, or geographic area, or all of them, as a court of competent

- 11 -

jurisdiction may determine to be reasonable, not arbitrary, and not against public policy, will be effective, binding, and enforceable against the Executive.

The period of time applicable to any covenant in this Section 8.2 will be extended by the duration of any violation by the Executive of such covenant.

The Executive will, while the covenant under this Section 8.2 is in effect, give notice to Craftmade, within ten days after accepting any other employment, of the identity of the Executive's employer. Craftmade or Craftmade may notify such employer that the Executive is bound by this Agreement and, at Craftmade's election, furnish such employer with a copy of this Agreement or relevant portions thereof.

ARTICLE IX

GENERAL PROVISIONS

9.1 Injunctive Relief and Additional Remedy. The Executive acknowledges that the injury that would be suffered by Craftmade as a result of a breach of the provisions of this Agreement (including any provision of Articles VII and
VIII) would be irreparable and that an award of monetary damages to Craftmade for such a breach would be an inadequate remedy. Consequently, Craftmade will have the right, in addition to any other rights it may have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Agreement, and Craftmade will not be obligated to post bond or other security in seeking such relief.

9.2 Covenants of Articles VII and VIII Are Essential and Independent Covenants. The covenants by the Executive in Articles VII and VIII are essential elements of this Agreement, and without the Executive's agreement to comply with such covenants, Craftmade would not have entered into this Agreement or employed the Executive. Craftmade and the Executive have independently consulted their respective counsel and have been advised in all respects concerning the reasonableness and propriety of such covenants, with specific regard to the nature of the business conducted by Craftmade.

The Executive's covenants in Articles VII and VIII are independent covenants and the existence of any claim by the Executive against Craftmade under this Agreement or otherwise, or against Craftmade, will not excuse the Executive's breach of any covenant in Articles VII or VIII.

If the Executive's employment hereunder expires or is terminated, this Agreement will continue in full force and effect as is necessary or appropriate to enforce the covenants and agreements of the Executive in Articles VII and VIII.

9.3 Representations and Warranties by the Executive. The Executive represents and warrants to Craftmade that the execution and delivery by the Executive of this Agreement do not, and

- 12 -

the performance by the Executive of the Executive's obligations hereunder will not, with or without the giving of notice or the passage of time, or both: (a) violate any judgment, writ, injunction, or order of any court, arbitrator, or governmental agency applicable to the Executive; or (b) conflict with, result in the breach of any provisions of or the termination of, or constitute a default under, any agreement to which the Executive is a party or by which the Executive is or may be bound.

9.4 Obligations Contingent on Performance. The obligations of Craftmade hereunder, including its obligation to pay the compensation provided for herein, are contingent upon the Executive's performance of the Executive's obligations hereunder.

9.5 Waiver. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by either party in exercising any right, power, or privilege under this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement.

9.6 Binding Effect; Delegation of Duties Prohibited. This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective successors, assigns, heirs, and legal representatives, including any entity with which Craftmade may merge or consolidate or to which all or substantially all of its assets may be transferred. The duties and covenants of the Executive under this Agreement, being personal, may not be delegated.

9.7 Notices. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties):

Executive:
Kathleen Brown Oher
4414 Bluffview
Dallas, Texas 75203
Facsimile No.:

- 13 -

with a copy to:

Cole Halliburton

5949 Sherry Lane
Suite 1622
Dallas, Texas 75225
Facsimile No.: (214) 987-1630

Craftmade:

Craftmade International, Inc.

650 South Royal Lane
Suite 100
P.O. Box #1037
Coppell, Texas 75019-1037 Attention: James Ridings Facsimile No.: (972) 304-3754

with a copy to:

Brian D. Barnard

Haynes and Boone, LLP
201 Main Street
Suite 2200
Fort Worth, Texas 76102 Facsimile No.: (817) 347-6650

9.8 Entire Agreement; Amendments. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof. This Agreement may not be amended orally, but only by an agreement in writing signed by the parties hereto.

9.9 Governing Law. This Agreement will be governed by the laws of the State of Texas without regard to conflicts of laws principles.

9.10 Jurisdiction. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement shall be brought against any of the parties in the courts of the State of Texas, County of Dallas, or, if it has or can acquire jurisdiction, in the United States District Court for the Northern District of Texas, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on either party anywhere in the world.

9.11 Section and Article Headings, Construction. The headings of Sections and Articles in this Agreement are provided for convenience only and will not affect its construction or

- 14 -

interpretation. All references to "Section" or "Sections" and "Article" or "Articles" refer to the corresponding Section or Sections and Article or Articles of this Agreement unless otherwise specified. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms.

9.12 Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

9.13 Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

* * * * *

- 15 -

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date above first written above.

EXECUTIVE:

/s/ Kathleen Brown Oher
--------------------------------------
Kathleen Brown Oher

CRAFTMADE INTERNATIONAL, INC.

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

- 16 -

EXHIBIT 10.21

[CHASE LOGO]

SEVENTH AMENDMENT TO CREDIT AGREEMENT

THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated effective as of May 12, 2000 (the "Effective Date"), is among CRAFTMADE INTERNATIONAL, INC., a Delaware corporation, DUROCRAFT INTERNATIONAL, INC., a Texas corporation, TRADE SOURCE INTERNATIONAL, INC., a Delaware corporation, DESIGN TRENDS, LLC, a Delaware limited liability company (collectively, jointly and severally, "Borrower"), C/D/R INCORPORATED, a Delaware corporation ("C/D/R"), CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as agent ("Agent"), and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION and THE FROST NATIONAL BANK (collectively, "Lenders").

PRELIMINARY STATEMENT

Agent, Lenders and Borrower are parties to a Credit Agreement dated as of May 30, 1996, as amended by a First Amendment dated as of October 8, 1996, a Second Amendment dated as of November 1, 1997, a Third Amendment dated as of July 1, 1998, a Fourth Amendment dated as of April 2, 1999, a Fifth Amendment (in letter form) dated as of August 11, 1999 and a Sixth Amendment dated as of November 12, 1999 (as so amended, the "Credit Agreement"). All capitalized terms defined in the Credit Agreement and not otherwise defined in this Amendment shall have the same meanings herein as in the Credit Agreement.

Agent, Lenders and Borrower have agreed to amend the Credit Agreement to modify the terms of the existing indebtedness and provide for additional credit, subject to the terms and conditions of the Credit Agreement as amended hereby, and in which Design Trends, LLC, shall become a party hereto as of the date hereof, and to effect certain other desired changes.

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, Agent, Lenders and Borrower hereby agree as follows:

Section 1. Addition of Definitions. The following definitions are hereby added to Section 1 of the Credit Agreement:

""Craftmade Pledge Agreement" means the Pledge Agreement of Craftmade International, Inc., in favor of the Agent and the Lenders in substantially the form of EXHIBIT K hereto, as the same may be amended, supplemented or otherwise modified from time to time.

""Design Trends" means Design Trends, LLC, a Delaware limited liability company."


""Dolan Northwest Pledge Agreement" means the Pledge Agreement of Dolan Northwest, LLC, a [DELAWARE] limited liability company, in favor of the Agent and the Lenders in substantially the form of EXHIBIT L hereto, as the same may be amended, supplemented or otherwise modified from time to time."

""Revolving Credit Commitment" shall mean, for each Lender, the obligation of such Lender to make Revolving Credit Loans in an aggregate principal amount at any one time outstanding up to but not exceeding $8,000,000 (in each case as the same may be reduced from time to time pursuant to Section 2.7). The aggregate principal amount of the Revolving Credit Commitments is $16,000,000."

""Revolving Credit Maturity Date" shall mean November 30, 2001."

""Revolving Credit Termination Date" shall mean November 29, 2001."

""Revolving Credit Loans" shall mean Advances under the Revolving Credit Commitment as provided for in Section 2.1."

""Revolving Credit Notes" shall mean the promissory notes provided for by
Section 2.2(a) and all promissory notes delivered in substitution or exchange therefor, in each case as the same shall be modified and supplemented and in effect from time to time."

""Term Loan Commitment" shall mean, for each Lender, the obligation of such Lender to make a Term Loan in the principal amount of $1,500,000. The original aggregate principal amount of the Term Loan Commitments is $3,000,000."

""Term Loan Maturity Date" shall mean May 12, 2001."

""Term Loan Notes" shall mean the promissory notes provided for by Section 2.2(b) and all promissory notes delivered in substitution or exchange therefor, in each case as the same shall be modified and supplemented and in effect from time to time."

""Term Loans" shall mean an Advance under the Term Loan Commitment as provided for by Section 2.1."

Section 2. Amendment of Definitions. The following definitions in Section 1 of the Credit Agreement are amended to read in their entirety as follows:

""Advance" means an advance of funds from time to time by Lenders to Borrower under the Revolving Credit Commitment and a one time advance of funds by Lenders to Borrower under the Term Loan Commitment."

""Applicable Rate" means:

(a) during the period that an Advance is a Prime Rate Advance, the Prime Rate minus 1/2 of one percent (0.5%); and

SEVENTH AMENDMENT TO CREDIT AGREEMENT - PAGE 2


(b) during the period that an Advance is a Eurodollar Advance, the Eurodollar Rate plus (i) at all times when the most recent compliance certificate delivered in accordance with SECTION 7.1(c) shows that the Funded Debt to EBITDA Ratio is less than 1.0 to 1.0, one and one-quarter percent (1.25%), (ii) at all times when the most recent compliance certificate delivered in accordance with SECTION 7.1(c) shows that the Funded Debt to EBITDA Ratio is greater than or equal to 1.0 to 1.0, but less than 1.5 to 1.0, one and one-half percent (1.5%), and (iii) at all times when the most recent compliance certificate delivered in accordance with SECTION 7.1(c) shows that the Funded Debt to EBITDA Ratio is greater than or equal to 1.5 to 1.0, one and three-quarters percent (1.75%)."

""Borrowing Base" means, at any particular time, an amount equal to the sum of (a) eighty percent (80%) of Eligible Accounts, plus (b) fifty-five percent (55%) of Eligible Inventory, plus (c) prior to, but not on or after, the end of the fiscal quarter of Borrowing ending on or nearest September 30, 2000, $1,000,000; provided however, that the Eligible Inventory component of the Borrowing Base, determined without regard to clause (c) above, shall never be greater than fifty percent (50%) of the aggregate amount of outstanding Advances.

""Collateral" includes (a) all of the collateral covered by the Craftmade Security Agreement, the Durocraft Security Agreement, the Trade Source Security Agreement, the Craftmade Pledge Agreement, the Dolan Northwest Pledge Agreement and the Design Trends Security Agreement, (b) all of the issued and outstanding capital stock of Durocraft, Trade Source, and C/D/R, and the limited liability company interest of Design Trends, pledged to the Agent and the Lenders pursuant to the Stock Pledge Agreement, the Craftmade Pledge Agreement and the Dolan Northwest Pledge Agreement, (c) the issued and outstanding stock of the Hong Kong Companies pledged to the Agent and the Lenders (in the case of each Hong Kong Company being approximately 65% of the total issued and outstanding capital stock of such Hong Kong Company) and (d) the Assignment of Life Insurance."

""Closing Date" shall mean the date upon which the extension of credit is made under the Term Loan Commitment."

""Commitments" shall mean the Revolving Credit Commitments and the Term Loan Commitments, and Commitments means such obligation of all Lenders, as such amounts may be reduced pursuant to SECTION 2.7 or otherwise."

Section 3. Amendment of Section 2.1. Section 2.1 is hereby amended to read in its entirety as follows:

"Section 2.1 Advances. Subject to the terms and conditions of this Agreement, each Lender severally agrees to make one or more Advances to Borrower from time to time from the date hereof to and including the Revolving Credit Termination Date under the Revolving Credit Commitment, and a single Advance to Borrower on the Closing Date under the Term Loan Commitment, provided that (a) the aggregate outstanding amount of all Advances shall not at any time exceed the lesser of the Commitments or the Borrowing Base and (b)

SEVENTH AMENDMENT TO CREDIT AGREEMENT - PAGE 3


the outstanding Advances supported only by the Eligible Inventory component of the Borrowing Base (without giving effect to clause (c) of the definition thereof) shall not at any time exceed fifty percent (50%) of the aggregate outstanding amount of all Advances. Subject to the foregoing limitations, and the other terms and provisions of this Agreement, Borrower may borrow, repay, and, solely with respect to the Revolving Credit Commitment, reborrow hereunder."

Section 4. Amendment of Section 2.2. Section 2.2 is hereby amended in its entirety to read as follows:

"Section 2.2. The Notes. The obligation of Borrower to repay the Advances shall be evidenced by the Notes (as specified below) executed and delivered by Borrower, and payable to the order of each Lender, in the aggregate principal amount of the Commitments and dated the date of the Seventh Amendment to this Agreement.

(a) Revolving Credit Note. The Revolving Credit Loans made by each Lender shall be evidenced by a single promissory note of Borrower substantially in the form of Exhibit A-1, dated the date of the Seventh Amendment to this Agreement, payable to such Lender in a principal amount equal to the amount of its Revolving Credit Commitment as originally in effect and otherwise duly completed.

(b) Term Note. The Term Loan made by each Lender shall be evidenced by a single promissory note of Borrower substantially in the form of Exhibit A-2, dated the date of the Seventh Amendment to this Agreement, payable to such Lender in a principal amount equal to the amount of its Term Loan Commitment and otherwise duly completed."

Section 5. Amendment of Section 2.3. Section 2.3 of the Credit Agreement is hereby amended to read in its entirety:

"Section 2.3 Repayment of Advances. Borrower shall pay the unpaid principal amounts of all Revolving Credit Loans on the Revolving Credit Maturity Date. Borrower shall pay the unpaid principal amounts of each Lender's Term Loan in equal quarterly installments of $375,000 on each of August 12, 2000, November 12, 2000, February 12, 2001 and May 12, 2001."

Section 6. Amendment of Section 6.18. Section 6.18 of the Credit Agreement is hereby amended to read in its entirety as follows:

"Section 6.18 Security Interests and Liens. The Craftmade Security Agreement, the Craftmade Pledge Agreement, the Durocraft Security Agreement, the Trade Source Security Agreement, the Stock Pledge Agreement, the Design Trends Pledge Agreement and the Assignment of Life Insurance create in favor of the Agent and the Lenders valid and enforceable Liens on the Collateral described therein, securing the payment and performance of the Obligations, including without limitation, all future Advances pursuant to this Agreement and the Notes and all extensions, renewals and other modifications thereof. Upon the filing of Uniform Commercial Code Financing

SEVENTH AMENDMENT TO CREDIT AGREEMENT - PAGE 4


Statements naming Craftmade, Durocraft or Trade Source, as applicable, as debtor and the Agent as secured party in the applicable jurisdictions set forth in SCHEDULE 5 hereto and the release or assignment to Agent of the Liens described on SCHEDULE 6 hereto, the Liens created by the Loan Documents shall constitute perfected, first priority Liens upon the Collateral which shall be superior and prior to the rights of all third Persons now existing or hereafter arising."

Section 7. Amendment of Section 7.1(i). Section 7.1(i) of the Credit Agreement is hereby amended to read in its entirety as follows:

"(i) Borrowing Base Report and Accounts Receivable Aging Report. As soon as available, and in any event within thirty-five (35) days after the end of each calendar month, a consolidated Borrowing Base Report and an Accounts Receivable Aging Report, each certified by the chief executive officer or chief financial officer of Borrower."

Section 8. Amendment of Section 8.4. The last proviso of Section 8.4 of the Credit Agreement is hereby amended to read in its entirety as follows:

"provided, however, that (i) so long as no Potential Default or Event of Default exists or would result, Borrower may purchase treasury stock during the fiscal quarter ending on or nearest to June 30, 2000 for a total consideration not to exceed $900,000 and (ii) at all times after the end of the fiscal quarter ending on or nearest to December 31, 2000, Borrower may purchase treasury stock only so long as the Consolidated Debt to Consolidated Tangible Net Worth Ratio is not greater than 2.0 to 1.0, and as a result of such purchase would not become over 2.0 to 1.0; in each case, as described in clauses (i) and (ii) immediately above, as evidenced by a Treasury Stock Purchase Compliance Certificate, substantially in the form of Exhibit F-1 attached hereto, submitted to Agent showing the effect of any potential treasury stock purchases contemplated by Borrower, including during a thirty (30) day period commencing on the earlier of (i) the date such Treasury Stock Purchase Compliance Certificate is sent to Agent or (ii) the date of the initial treasury stock purchase covered by such certificate."

Section 9. Amendment of Section 9.1. Section 9.1 of the Credit Agreement is hereby amended to read in its entirety as follows:

"Section 9.1 Consolidated Debt to Consolidated Tangible Net Worth Ratio. Borrower will maintain a Consolidated Debt to Consolidated Tangible Net Worth Ratio of not greater than 2.6 to 1.0 at all times before September 30, 2000, of not greater than 2.4 to 1.0 at all times during the period from and including September 30, 2000 through and including December 30, 2000, and of not greater than 2.25 to 1.0 on December 31, 2000 and at all times thereafter."

Section 10. Amendment of Section 9.2. Section 9.2 of the Credit Agreement is hereby amended to read in its entirety as follows:

SEVENTH AMENDMENT TO CREDIT AGREEMENT - PAGE 5


"Section 9.2 Capital Expenditures. Borrower will not permit the aggregate capital expenditures of Borrower and its Subsidiaries to exceed Six Hundred Thousand Dollars ($600,000) during any fiscal year; provided, however, that during the fiscal year ending June 30, 2001 such limitation shall instead be One Million Eight Hundred Thousand Dollars ($1,800,000)."

Section 11. Amendment of Section 9.3. Section 9.3 of the Credit Agreement is hereby amended to read as follows:

"Section 9.3 Funded Debt to EBITDA Ratio. Borrower will at all times maintain a Funded Debt to EBITDA Ratio, measured monthly in respect of the twelve most recently completed calendar months, of not greater than 2.0 to 1.0 until December 31, 2000, and of not greater than 1.75 to 1.0 at all times thereafter."

Section 12. Addition of Section 8.12. A new Section 8.12 of the Credit Agreement is hereby added, to read in its entirety as follows:

"Section 8.12 Limited Liability Company Distributions. Borrower shall cause each distribution by Design Trends (which in any case shall occur no more frequently than quarterly) to not exceed twenty-five percent (25%) of Design Trend's Net Income (calculated as if Design Trends were a C corporation under the Code) for the preceding fiscal quarter."

Section 13. Addition of Section 8.13. A new Section 8.13 of the Credit Agreement is hereby added, to read in its entirety as follows:

"Section 8.13 Royalties, Etc. from Licensing Agreements. Borrower shall cause any and all current licensing agreements between Borrower, its Subsidiaries and affiliates, considered as one party in interest and/or Pat Dolan and his affiliates, considered as the other party in interest, to not be modified, amended or rescinded, without Agent's prior written consent. Without limiting the foregoing, neither of the two existing agreements will be modified to permit royalties or fees or other payments (other than distributions, limited as aforesaid) to Pat Dolan and/or his affiliates."

Section 14. Amendment of Section 9.4. Section 9.4 of the Credit Agreement is hereby amended to read in its entirety as follows:

"Section 9.4 Fixed Charge Coverage Ratio. Borrower will at all times maintain a Fixed Charge Coverage Ratio of greater than 1.05 to 1.0. Such ratio shall be first determined for the fiscal quarter ending June 30, 2000; thereafter, the determination period shall accumulate until four consecutive fiscal quarters have been completed; thereafter, such ratio shall be determined with respect to the four most recently completed fiscal quarters."

Section 15. Amendment and Restatement of Exhibits. Exhibit A to the Credit Agreement is hereby amended and restated in its entirety to be in the form of Exhibits A-1 and A-2 to this Amendment. Exhibits C, F and F-1 to the Credit Agreement are hereby amended and

SEVENTH AMENDMENT TO CREDIT AGREEMENT - PAGE 6


restated in their entireties to be in the form of Exhibits C, F and F-1, respectively, to this Amendment.

Section 16. Representations; No Event of Default. Borrower hereby represents and warrants to Agent and Lenders that:

- the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and delivered in connection with this Amendment have been authorized by all requisite corporate (or company, as applicable) action on the part of Borrower and Guarantor and will not violate the certificate of incorporation or articles of incorporation (or other charter documents), as applicable, or bylaws of any of Borrower or Guarantor; and

- neither the certificate of incorporation or articles of incorporation (or other charter documents), as applicable, nor bylaws of any of Borrower or Guarantor have been amended or revoked since May 30, 1996 (or, in the case of Design Trends, ever amended), except as certified in writing to Agent and Lenders by Borrower or Guarantor contemporaneously with the execution and delivery of this Amendment; and

- the representations and warranties contained in the Credit Agreement, as amended hereby, and any other Loan Document, are true and correct on and as of the date hereof as though made on and as of the date hereof; and

- as of the date of this Amendment, no Event of Default has occurred and is continuing and no event or condition has occurred that with the giving of notice or lapse of time or both would be an Event of Default (and in this connection Lenders hereby waive the Events of Default that occurred prior to the date of this Agreement (a) under Section 9.1 and (b) of treasury stock purchases in excess of the limitation set forth in Section 8.4); and

- each of Borrower and Guarantor is in full compliance with all covenants and agreements contained in the Credit Agreement, as amended hereby.

Section 17. Conditions Precedent. The effectiveness of this Amendment shall be subject to the following conditions precedent:

- Each Lender shall have received two promissory notes of Borrower payable to the order of such Lender, in substantially the form of EXHIBIT A-1 and EXHIBIT A-2 hereto, with appropriate completion, which promissory notes shall be in modification, increase and replacement of (but not in extinguishment of) that certain promissory note payable to such Lender in the form of EXHIBIT A to the Credit Agreement (before giving effect to this Amendment), and dated as of November 12, 1999 and in the stated maximum principal amount of $8,000,000; and

- Lenders shall have received the Craftmade Pledge Agreement (together with the limited liability company certificate, duly endorsed in blank, contemplated to be pledged thereby); and

SEVENTH AMENDMENT TO CREDIT AGREEMENT - PAGE 7


- Lenders shall have received the Dolan Northwest Pledge Agreement (together with the limited liability company certificate, duly endorsed in blank, contemplated to be pledged thereby); and

- Lenders shall have received a consent from Design Trends, LLC consenting to the pledge to the Agent of the limited liability company interest thereof held by Craftmade International, Inc.; and

- Lenders shall have received a consent from Design Trends, LLC, consenting to the pledge to the agent of the limited liability company interest thereof held by Dolan Northwest, LLC; and

- Lenders shall have received an assignment from Design Trends, LLC, assigning as collateral its interest under any and all current licensing agreements, including but not limited to, that certain licensing agreement among Dolan Northwest, LLC and Design Trends, LLC, dated August 3, 1999; and

- Lenders shall have received a consent from Dolan Northwest, LLC, consenting to the assignment of Design Trend, LLC's interest under any and all current licensing agreements, including but not limited to, that certain licensing agreement among Dolan Northwest, LLC and Design Trends, LLC, dated August 3, 1999; and

- Lenders shall have received Uniform Commercial Code financing statements or amendments executed by Design Trends, and covering such Collateral of Design Trends as the Agent may request, and Uniform Commercial Code termination statements, assignments or lien subordination agreements as the Agent may request; and

- Lenders shall have received a Secretary's Certificate from the secretary or assistant secretary of Borrower and Guarantor certifying and attaching appropriate corporate resolutions regarding the transactions contemplated hereby, and statements of incumbency; and

- Lenders shall have received such other documents incidental and appropriate to the transactions provided for herein as Lenders or their counsel may reasonably request, and all such documents shall be in form and substance reasonably satisfactory to Lenders; and

- All legal matters incident to the consummation of the transactions contemplated hereby shall be reasonably satisfactory to special counsel for Lenders retained at the expense of Borrower.

Section 18. Guaranty. C/D/R hereby acknowledges, consents and agrees to this Amendment and (a) acknowledges that its obligations under that certain Guaranty Agreement executed by it effective as of May 30, 1996, in favor of Agent and Lenders, includes a guaranty of all of the obligations, indebtedness and liabilities of Borrower under the Credit Agreement as amended by this Amendment (specifically including the increased principal amount of $19,000,000 potentially available under the Credit Agreement), (b) represents to Agent and Lenders that such

SEVENTH AMENDMENT TO CREDIT AGREEMENT - PAGE 8


Guaranty remains in full force and effect and shall continue to be its legal, valid and binding obligation, enforceable against it in accordance with its terms, and (c) agrees that this Amendment and all documents executed in connection herewith do not operate, and that the prior amendments to the Credit Agreement and all documents executed in connection therewith have not operated, to reduce or discharge its obligations under such Guaranty.

Section 19. Ratification. Borrower acknowledges that each of the Loan Documents is in all respects ratified and confirmed, and all of the rights, powers and privileges created by this Amendment or under the Loan Documents are ratified, extended, carried forward and remain in full force and effect except as the Credit Agreement is amended by this Amendment. Except as expressly amended by this Amendment, the Credit Agreement is and shall be unchanged.

Section 20. Liens and Security Interests. Borrower hereby extends and renews the Liens and security interests previously granted to Agent and Lenders and agrees that this Amendment shall in no manner affect or impair any Liens or security interests previously granted. Borrower hereby acknowledges that such Liens and security interests (a) secure all Debt to Lenders, specifically including the term loan facility created by this Amendment, and (b) are valid and existing.

Section 21. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed an original and all of which taken together shall constitute but one and the same agreement.

Section 22. Joint and Several; Loan Documents. Any and all obligations of Borrower under the Loan Documents are joint and several, whether or not expressly so stated. This Amendment shall be included within the definition of "Loan Documents" as used in the Agreement. The "Agreement" as used in the Credit Agreement is a reference to the Credit Agreement as amended by this Amendment. Borrower agrees, acknowledges and confirms that any and all references to Craftmade International, Inc., Durocraft International, Inc., and Trade Source International, Inc. as Borrower, shall now include Design Trends, LLC, as set forth in this Amendment, and that Design Trends is henceforth a Borrower for purposes of the Loan Documents and any and all documents issued in connection therewith, whether or not expressly so stated.

Section 23. Enforceability. Borrower and Guarantor hereby represent and warrant that, as of the date of this Amendment, the Credit Agreement and all documents and instruments executed in connection therewith are in full force and effect and that there are no claims, counterclaims, offsets or defenses to any of such documents or instruments.

Section 24. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND AS APPLICABLE, THE LAWS OF THE UNITED STATES OF AMERICA.

THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE TEXAS BUSINESS & COMMERCE CODE, AND REPRESENT THE FINAL

SEVENTH AMENDMENT TO CREDIT AGREEMENT - PAGE 9


AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed effective as of the Effective Date.

BORROWER:                     CRAFTMADE INTERNATIONAL, INC.


                              By: /s/ JAMES R. RIDINGS
                                 -----------------------------

Name: James R. Ridings Title: Chief Executive Officer

DUROCRAFT INTERNATIONAL, INC.

By: /s/ JAMES R. RIDINGS
   -----------------------------
Name:    James R. Ridings
Title:   Chief Executive Officer

TRADE SOURCE INTERNATIONAL, INC.

By: /s/ JAMES R. RIDINGS
   -----------------------------
Name:    James R. Ridings
Title:   Chief Executive Officer

DESIGN TRENDS, LLC

By: /s/ JAMES R. RIDINGS
   -----------------------------
Name:    James R. Ridings
Title:   Chief Executive Officer

SEVENTH AMENDMENT TO CREDIT AGREEMENT - PAGE 10


GUARANTOR:               C/D/R INCORPORATED


                         By: /s/ CLIFFORD CRIMINGS
                            -----------------------------

Name: Clifford Crimings Title: President

LENDERS:                 CHASE BANK OF TEXAS, NATIONAL
                         ASSOCIATION, as Agent and as Lender


                         By: /s/ JERRY G. PETREY
                            -----------------------------

Name: Jerry G. Petrey Title: Vice President

THE FROST NATIONAL BANK

By: /s/ D. MICHAEL RANDALL
   -----------------------------
Name:    D. Michael Randall
Title:   Senior Vice President

SEVENTH AMENDMENT TO CREDIT AGREEMENT - PAGE 11


BORROWING BASE REPORT
EXHIBIT C

Chase Bank of Texas, National Association, as Agent Attention: Jerry G. Petrey, Vice President 500 East Border Street
P.O. Box 250
Arlington, Texas 76004

Gentlemen:

This Borrowing Base Report, for the month ending ____________, ____, is executed and delivered pursuant to that certain Credit Agreement (the "Credit Agreement") dated as of May 30, 1996, as amended, among Craftmade International, Inc., DuroCraft International, Inc., Trade Source International, Inc., Chase Bank of Texas, National Association, as Agent, and the Lenders parties thereto. All capitalized terms used therein have the meanings assigned to them in the Credit Agreement.

The undersigned, an authorized officer of Borrower, on behalf of Borrower hereby represents and warrants to Agent and Lenders that:

- all information contained herein is true, correct and complete; and

- the total Eligible Accounts and Eligible Inventory referred to below represent the Eligible Accounts and Eligible Inventory that qualify for purposes of determining the Borrowing Base under the Credit Agreement; and

- attached hereto as Exhibit "A" is a true, correct and complete Accounts Receivable Aging Report dated as of the date hereof.

1.   Eligible Accounts

(a)  Gross Accounts                                                                       $__________

(b)  Less:

     (i)  Accounts over 60 days past due                                                  $__________

     (ii) Accounts, not already included in (i), of any
          account debtor whose accounts total $150,000.00 or
          more if 20% of the dollar amount of all accounts
          of such account debtor are 60 days or more past
          due. [Applicable only if 18% or more of Borrower's
          total Accounts are 60 days or more past due. %
          currently past due _________].                                                  $__________


     (iii) Affiliate Accounts                                                             $__________

     (iv)  Accounts subject to setoff or dispute                                          $__________

     (v)   Other ineligibles                                                              $__________

     (vi)  Total Ineligible Accounts
           (sum of lines (i)-(v))                                                         $__________

(c)  Total Eligible Accounts
     (line (a) minus line (b)(vi))                          $__________ x 80% =           $__________

2.   Eligible Inventory

(a)  Gross finished inventory
     (at lesser of cost or market)                                                        $__________

(b)  Gross unassembled lamp parts
     (at lesser of cost or market)                                                        $__________

(c)  Total Gross Inventory
     (sum of (a) + (b))                                                                   $__________

(d)  Less:  Ineligibles                                                                   $__________

(e)  Total Eligible Inventory
     (line (c) minus line (d))                              $__________ x 55% =           $__________

3.   Total Borrowing Base

     (line 1(c) plus line 2(e) plus, if on or
     before the end of the fiscal quarter
     ending nearest September 30, 2000,
     $1,000,000)                                                                          $__________

4.   Outstanding principal amount
     of Advances (including unpaid amounts
     of $_________ (please complete) under
     term loans in the original principal amount
     of $3,000,000)                                                                       $__________

5.   Net Availability

     (a)   (Lesser of Commitments [minus
           outstanding face amount of Letters
           of Credit] or Borrowing Base
           (line 3)) minus line 4                           $__________

     (b)   Outstanding Advances supported

BORROWING BASE REPORT - PAGE 2


      by Eligible Inventory (not to
      exceed 50% of line 4)                            $__________

(c)   Amount by which line 5(b)
      exceeds 50% of line 4                            $__________

If the amount listed on line 5(a) is a negative number or if any amount is listed on line 5(c), then Borrower will promptly repay such amount plus accrued interest thereon to Agent, for the ratable benefit of Lenders, in accordance with the Credit Agreement.

The undersigned authorized officer of Borrower further represents and warrants on behalf of Borrower to Agent and Lenders that the representations and warranties contained in Article 6 of the Credit Agreement and in each of the other Loan Documents are true and correct on and as of the date of this report as if made on and as of the date hereof, and that no Event of Default or Potential Default has occurred and is continuing.

Date:

BORROWER:

CRAFTMADE INTERNATIONAL, INC.

By:
   -----------------------------
Name:    Kathy Oher
Title:   Chief Financial Officer

DUROCRAFT INTERNATIONAL, INC.

By:
   -----------------------------
Name:    Kathy Oher
Title:   Chief Financial Officer

TRADE SOURCE INTERNATIONAL, INC.

By:
   -----------------------------
Name:    Kathy Oher
Title:   Chief Financial Officer

DESIGN TRENDS, LLC

By:

Name:
Title:

BORROWING BASE REPORT - PAGE 3


EXHIBIT "A"
TO
BORROWING BASE REPORT

Accounts Receivable Aging Report


COVENANT COMPLIANCE CERTIFICATE EXHIBIT F

Chase Bank of Texas, National Association, as Agent Attention: Jerry G. Petrey, Vice President 500 East Border Street
P.O. Box 250
Arlington, Texas 76004

Gentlemen:

This Covenant Compliance Certificate covers the period from __________, ___ to ___________, ____, and is delivered pursuant to that certain Credit Agreement (the "Credit Agreement") dated as of May 30, 1996, as amended, among Craftmade International, Inc., Design Trends, LLC, DuroCraft International, Inc., Trade Source International, Inc., Chase Bank of Texas, National Association, as Agent, and the Lenders parties thereto. All capitalized terms used herein, unless otherwise defined herein, shall have the same meanings as set forth in the Credit Agreement.

The undersigned, an authorized officer of Borrower, does hereby certify to Agent and Lenders that:

1. No Default. To the best of the undersigned's knowledge, no Event of Default and no Potential Default has occurred and is continuing (or if an Event of Default or Potential Default has occurred and is continuing, Exhibit "A" attached hereto outlines the nature thereof and the action which is proposed to be taken by Borrower with respect thereto).

2. Consolidated Debt to Consolidated Tangible Net Worth Ratio (calculated as provided for in Section 9.1 of the Credit Agreement)

     (a)  Consolidated Debt                                                $
                                                                            ---------------

     (b)  Consolidated Tangible Net Worth                                  $
                                                                            ---------------

     (c)  Ratio [(a) divided by (b)]
          (must not be greater than 2.6 before 9-30-2000; 2.4
          at 9-30-00 and thereafter until 12-30-00; 2.25 at
          12-31-00 and thereafter)
                                                                            ---------------

3.   Capital Expenditures

     (the beginning of current fiscal year through date hereof,
     must not exceed $600,000 in any fiscal year or, during
     the fiscal year ending June 2001, $1,800,000)                         $
                                                                            ---------------


4. Funded Debt to EBITDA Ratio (calculated with respect to the twelve most recently completed calendar months):

(a)    Funded Debt                                       $
                                                          --------------
       Net income
       (after interest & tax expenses)                   $
                                                          --------------

       Plus: Interest Expense                            $
                                                          --------------

       Plus:  Tax Expense                                $
                                                          --------------

       Plus:  Depreciation                               $
                                                          --------------

       Plus:  Amortization                               $
                                                          --------------

(b)    Equals: EBITDA                                    $
                                                          --------------

       Funded Debt to EBITDA Ratio
       [(a) divided by (b)] (must not be greater
       than 2.0 until 12-31-2000 and 1.75 thereafter)     --------------

5. Applicable Rate Determination (applies only with respect to Eurodollar Advances):

The Applicable Rate shall be determined according to the following under the Funded Debt to EBIDTA Ratio, such ratio to be measured at end of each calendar quarter for purposes of the Eurodollar Advances.

Funded Debt to EBIDTA ratio              Circle One
---------------------------              ----------
Less than 1.0 to 1.0,
Applicable Rate equals                   Eurodollar Rate + 1.25%

Greater than or equal to 1.0 to 1.0
but less than 1.5 to 1.0,
Applicable Rate equals                   Eurodollar Rate + 1.5%

Greater than or equal to 1.5 to 1.0
Applicable Rate equals                   Eurodollar Rate + 1.75%

COVENANT COMPLIANCE CERTIFICATE - PAGE 2


7. Fixed Charge Coverage Ratio (calculated as provided in Section 9.4 of the Credit Agreement) - must be greater than 1.05; determined first for the fiscal quarter ending June 30, 2000; thereafter determined on an accumulated basis until four consecutive quarters are achieved, and thereafter, with respect to the four most recently completed fiscal quarters.:

EBITDA                                               $
                                                      -----------------
Less:  cash Tax Expense                              $
                                                      -----------------
Less:  treasury stock repurchases                    $
                                                      -----------------
Equals:  Numerator (i.e., cash for coverage)         $
                                                      -----------------
Principal payments on Debt (including
prepayments of Mortgage Debt,
excluding payments on the revolver loan)             $
                                                      -----------------
Plus:  Interest Expense                              $
                                                      -----------------

Plus:  cash dividends                                $
                                                      -----------------
Equals:  Denominator (i.e., charges)                 $

                                                      -----------------

Numerator divided by denominator =                   ___________ to 1.0

Attached hereto are Schedules setting forth the calculations supporting the computations set forth in Items 2, 3, 4, 5 and 6 of this Covenant Compliance Certificate. All information contained herein and on the attached Schedules is true, complete and correct.

IN WITNESS WHEREOF, the undersigned has executed this certificate effective this ______ day of __________.

CRAFTMADE INTERNATIONAL, INC.

By:

Name: Kathy Oher Title: Chief Financial Officer

DUROCRAFT INTERNATIONAL, INC.

By:

Name: Kathy Oher Title: Chief Financial Officer

COVENANT COMPLIANCE CERTIFICATE - PAGE 3


TRADE SOURCE INTERNATIONAL, INC.

By:

Name: Kathy Oher Title: Chief Financial Officer

DESIGN TRENDS, LLC

By:

Name:

Title:

COVENANT COMPLIANCE CERTIFICATE - PAGE 4


EXHIBIT A-1
REVOLVING CREDIT NOTE

$8,000,000.00 Dallas, Texas May 12, 2000

FOR VALUE RECEIVED, the undersigned CRAFTMADE INTERNATIONAL, INC., a Delaware corporation, DUROCRAFT INTERNATIONAL, INC., a Texas corporation, DESIGN TRENDS, and TRADE SOURCE INTERNATIONAL, INC., a Delaware corporation (jointly and severally, "Maker"), hereby promise to pay to the order of ______ ("Payee"), at the offices of Agent at 2200 Ross Avenue, P.O. Box 660197, Dallas, Dallas County, Texas 75266-0197, in lawful money of the United States of America, the principal sum of EIGHT MILLION DOLLARS AND 00/100ths ($8,000,000.00), or so much thereof as may be advanced and outstanding hereunder, together with interest on the outstanding principal balance as hereinafter described.

This Note is one of the Notes provided for in that certain Credit Agreement dated as of May 30, 1996 among Maker, Chase Bank of Texas, National Association (formerly named Texas Commerce Bank National Association) as Agent, and the Lenders parties thereto (as the same may be amended or otherwise modified from time to time, including most recently pursuant to that certain Seventh Amendment to Credit Agreement of even date herewith, the "Agreement"). Capitalized terms not otherwise defined herein shall have the same meanings as set forth in the Agreement. Reference is hereby made to the Agreement for provisions affecting this Note, including, without limitation, provisions regarding the limitation of interest charged hereunder, the Collateral securing this Note, Potential Defaults and Events of Default and Payee's rights arising as a result of the occurrence thereof.

Subject to the terms of the Agreement, the outstanding principal balance hereunder shall bear interest prior to maturity at a varying rate per annum that shall from day to day be equal to the lesser of (a) the Maximum Rate or (b) the Applicable Rate, each such change in the rate of interest charged hereunder to become effective, without notice to Maker, on the effective date of each change in the Applicable Rate or the Maximum Rate, as the case may be; provided, however, that if at any time the rate of interest specified in clause (b) preceding shall exceed the Maximum Rate, thereby causing the interest rate thereon to be limited to the Maximum Rate, then any subsequent reduction in the Applicable Rate shall not reduce the rate of interest thereon below the Maximum Rate until such time as the aggregate amount of interest accrued thereon equals the aggregate amount of interest which would have accrued thereon if the interest rate specified in clause (b) preceding shall at all times been in effect. All outstanding principal advanced under this Note shall be due and payable on the Revolving Credit Maturity Date. Accrued and unpaid interest on this Note shall be due and payable on the last Business Day of each month, commencing May 31, 2000, at the end of each Interest Period and on the Revolving Credit Maturity Date. All past due principal and interest shall bear interest at the Default Rate.

Interest on the indebtedness evidenced by this Note shall be computed on the basis of a year of 360 days and the actual number of days elapsed (including the first day but excluding the last day) unless such calculation would result in a usurious rate, in which case interest shall be calculated on the basis of a year of 365 or 366 days, as the case may be.

If the holder hereof expends any effort in any attempt to enforce payment of all or any part


or installment of any sum due the holder hereunder, or if this Note is placed in the hands of an attorney for collection, or if it is collected through any legal proceedings, then Maker agrees to pay all costs, expenses and fees incurred by the holder, including reasonable attorneys' fees.

This Note shall be governed by and construed in accordance with the laws of the State of Texas and the applicable laws of the United States of America. This Note is performable in Dallas County, Texas.

Maker and each surety, guarantor, endorser and other party ever liable for payment of any sums of money payable on this Note jointly and severally waive notice, presentment, demand for payment, protest, notice of protest and non-payment or dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, diligence in collecting, grace, and all other formalities of any kind, and consent to all extensions without notice for any period or periods of time and partial payments, before or after maturity, and any impairment of any collateral securing this Note, all without prejudice to the holder. The holder shall similarly have the right to deal in any way, at any time, with one or more of the foregoing parties without notice to any other party, and to grant any such party any extensions of time for payment of any of said indebtedness, or to release or substitute part or all of the collateral securing this Note, or to grant any other indulgences or forbearances whatsoever, without notice to any other party and without in any way affecting the personal liability of any party hereunder.

Maker hereby authorizes the holder hereof to record in its records all advances made to Maker hereunder and all payments made on account of the principal hereof, which records shall be prima facie evidence as to the outstanding principal amount of this Note; provided, however, that any failure by the holder hereof to make any such records shall not limit or otherwise affect the obligations of Maker under the Agreement or this Note.

This Note is made and given in modification and replacement of (but not in extinguishment of) that certain promissory note executed and delivered by Maker, payable to the order of Payee, dated as of July 1, 1998, and in the stated maximum principal amount of $7,000,000, as amended by that certain promissory note executed and delivered by Maker, payable to the order of Payee dated November 12, 1999, and in the stated maximum principal amount of $8,000,000.

PURSUANT TO SECTION 346.004 OF THE TEXAS FINANCE CODE, CHAPTER 346 OF THE TEXAS FINANCE CODE SHALL NOT APPLY TO THIS NOTE, OR ANY ADVANCE OR LOAN EVIDENCED BY THIS NOTE.

THIS WRITTEN AGREEMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS AS WRITTEN, REPRESENTS THE FINAL AGREEMENT BETWEEN MAKER AND PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF MAKER AND PAYEE. THERE ARE NO ORAL AGREEMENTS BETWEEN MAKER AND PAYEE.

PROMISSORY NOTE - PAGE 2


CRAFTMADE INTERNATIONAL, INC.

By:

Name: James R. Ridings Title: Chief Executive Officer

DUROCRAFT INTERNATIONAL, INC.

By:

Name: James R. Ridings Title: Chief Executive Officer

TRADE SOURCE INTERNATIONAL, INC.

By:

Name: James R. Ridings Title: Chief Executive Officer

DESIGN TRENDS, LLC

By:

Name:


Title:

PROMISSORY NOTE - PAGE 3


TERM NOTE EXHIBIT A-2

$1,500,000.00 Dallas, Texas May 12, 2000

FOR VALUE RECEIVED, the undersigned CRAFTMADE INTERNATIONAL, INC., a Delaware corporation, DUROCRAFT INTERNATIONAL, INC., a Texas corporation, DESIGN TRENDS, and TRADE SOURCE INTERNATIONAL, INC., a Delaware corporation (jointly and severally, "Maker"), hereby promise to pay to the order of ______ ("Payee"), at the offices of Agent at 2200 Ross Avenue, P.O. Box 660197, Dallas, Dallas County, Texas 75266-0197, in lawful money of the United States of America, the principal sum of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS AND 00/100ths ($1,500,000.00), or so much thereof as may be advanced and outstanding hereunder, together with interest on the outstanding principal balance as hereinafter described.

This Note is one of the Notes provided for in that certain Credit Agreement dated as of May 30, 1996 among Maker, Chase Bank of Texas, National Association (formerly named Texas Commerce Bank National Association) as Agent, and the Lenders parties thereto (as the same may be amended or otherwise modified from time to time, including most recently pursuant to that certain Seventh Amendment to Credit Agreement of even date herewith, the "Agreement"). Capitalized terms not otherwise defined herein shall have the same meanings as set forth in the Agreement. Reference is hereby made to the Agreement for provisions affecting this Note, including, without limitation, provisions regarding the limitation of interest charged hereunder, the Collateral securing this Note, Potential Defaults and Events of Default and Payee's rights arising as a result of the occurrence thereof.

Subject to the terms of the Agreement, the outstanding principal balance hereunder shall bear interest prior to maturity at a varying rate per annum that shall from day to day be equal to the lesser of (a) the Maximum Rate or (b) the Applicable Rate, each such change in the rate of interest charged hereunder to become effective, without notice to Maker, on the effective date of each change in the Applicable Rate or the Maximum Rate, as the case may be; provided, however, that if at any time the rate of interest specified in clause (b) preceding shall exceed the Maximum Rate, thereby causing the interest rate thereon to be limited to the Maximum Rate, then any subsequent reduction in the Applicable Rate shall not reduce the rate of interest thereon below the Maximum Rate until such time as the aggregate amount of interest accrued thereon equals the aggregate amount of interest which would have accrued thereon if the interest rate specified in clause (b) preceding shall at all times been in effect. The outstanding principal of this Note shall be due and payable as set forth in the Credit Agreement, as amended. All past due principal and interest shall bear interest at the Default Rate.

Interest on the indebtedness evidenced by this Note shall be computed on the basis of a year of 360 days and the actual number of days elapsed (including the first day but excluding the last day) unless such calculation would result in a usurious rate, in which case interest shall be calculated on the basis of a year of 365 or 366 days, as the case may be.

If the holder hereof expends any effort in any attempt to enforce payment of all or any part or installment of any sum due the holder hereunder, or if this Note is placed in the hands of an attorney for collection, or if it is collected through any legal proceedings, then Maker agrees to pay all costs, expenses and fees incurred by the holder, including reasonable attorneys' fees.


This Note shall be governed by and construed in accordance with the laws of the State of Texas and the applicable laws of the United States of America. This Note is performable in Dallas County, Texas.

Maker and each surety, guarantor, endorser and other party ever liable for payment of any sums of money payable on this Note jointly and severally waive notice, presentment, demand for payment, protest, notice of protest and non-payment or dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, diligence in collecting, grace, and all other formalities of any kind, and consent to all extensions without notice for any period or periods of time and partial payments, before or after maturity, and any impairment of any collateral securing this Note, all without prejudice to the holder. The holder shall similarly have the right to deal in any way, at any time, with one or more of the foregoing parties without notice to any other party, and to grant any such party any extensions of time for payment of any of said indebtedness, or to release or substitute part or all of the collateral securing this Note, or to grant any other indulgences or forbearances whatsoever, without notice to any other party and without in any way affecting the personal liability of any party hereunder.

Maker hereby authorizes the holder hereof to record in its records all advances made to Maker hereunder and all payments made on account of the principal hereof, which records shall be prima facie evidence as to the outstanding principal amount of this Note; provided, however, that any failure by the holder hereof to make any such records shall not limit or otherwise affect the obligations of Maker under the Agreement or this Note.

THIS WRITTEN AGREEMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS AS WRITTEN, REPRESENTS THE FINAL AGREEMENT BETWEEN MAKER AND PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF MAKER AND PAYEE. THERE ARE NO ORAL AGREEMENTS BETWEEN MAKER AND PAYEE.

CRAFTMADE INTERNATIONAL, INC.

By:

Name: James R. Ridings Title: Chief Executive Officer

DUROCRAFT INTERNATIONAL, INC.

By:

Name: James R. Ridings Title: Chief Executive Officer

PROMISSORY NOTE - PAGE 2


TRADE SOURCE INTERNATIONAL, INC.

By:

Name: James R. Ridings Title: Chief Executive Officer

DESIGN TRENDS, LLC

By:

Name:
Title:

PROMISSORY NOTE - PAGE 3


EXHIBIT F-1

TREASURY STOCK PURCHASE COMPLIANCE CERTIFICATE

Chase Bank of Texas, National Association, as Agent Attention: Jerry G. Petrey, Vice President 500 East Border Street
P.O. Box 250
Arlington, Texas 76004

Gentlemen:

This Treasury Stock Purchase Compliance Certificate covers the period from __________, ____ to ___________, ____, and is delivered pursuant to that certain Credit Agreement (the "Credit Agreement") dated as of May 30, 1996, as amended, among Craftmade International, Inc., Design Trends, LLC, DuroCraft International, Inc., Trade Source International, Inc., Chase Bank of Texas, National Association, as Agent, and the Lenders parties thereto. All capitalized terms used herein, unless otherwise defined herein, shall have the same meanings as set forth in the Credit Agreement.

The undersigned, an authorized officer of Borrower, does hereby certify to Agent and Lenders that:

1.   No Default. To the best of the undersigned's knowledge, no Event of
Default and no Potential Default has occurred and is continuing (or if an
Event of Default or Potential Default has occurred and is continuing,
Exhibit "A" attached hereto outlines the nature thereof and the action
which is proposed to be taken by Borrower with respect thereto).

2.   Consolidated Debt to Consolidated Tangible Net Worth Ratio (calculated
     as provided for in Section 9.1 of the Credit Agreement)

     (a)  Consolidated Debt (including Debt to be incurred in connection
          with Proposed Treasury Stock Purchase(s))                             $
                                                                                 ----------------

     (b)  Consolidated Tangible Net Worth                                       $
                                                                                 ----------------

     (c)  Minus: Proposed Treasury Stock Purchase(s)                            $
                                                                                 ----------------

     (d)  Equals: Consolidated Tangible Net Worth (after Proposed Treasury
          Stock Purchase(s))                                                    $
                                                                                 ----------------

     (e)  Ratio [(a) divided by (d)] (must not be greater than 2.6 until
          9-30-2000; 2.4 at 9-30-2000 and thereafter through and at
          11-30-2000; 2.25 thereafter through and at 12-30-00; and 2.0
          thereafter)                                                           -----------------

TREASURY STOCK PURCHASE COMPLIANCE CERTIFICATE - PAGE 1


In addition: Treasury Stock Purchases must not exceed $900,000 in the
fiscal quarter ending/ended June 30, 2000. Compliance (circle one)         Yes          No

Attached hereto are Schedules setting forth the calculations supporting the computations set forth in Item 2 of this Treasury Stock Purchase Compliance Certificate. All information contained herein and on the attached Schedules is true, complete and correct.

TREASURY STOCK PURCHASE COMPLIANCE CERTIFICATE - PAGE 2


IN WITNESS WHEREOF, the undersigned has executed this certificate effective this ______ day of __________.

CRAFTMADE INTERNATIONAL, INC.

By:

Name: Kathy Oher Title: Chief Financial Officer

DUROCRAFT INTERNATIONAL, INC.

By:

Name: Kathy Oher Title: Chief Financial Officer

TRADE SOURCE INTERNATIONAL, INC.

By:

Name: Kathy Oher Title: Chief Financial Officer

DESIGN TRENDS, LLC.

By:

Name:
Title:

TREASURY STOCK PURCHASE COMPLIANCE CERTIFICATE - PAGE 3


EXHIBIT 21

CRAFTMADE INTERNATIONAL, INC. AND ITS SUBSIDIARIES

The following schedule lists the subsidiaries of Craftmade International, Inc., a Delaware corporation, as of August 31, 2000:

              Corporate Name                         State of Organization
              --------------                         ---------------------
Durocraft International, Inc.                                Texas
C/D/R Incorporated                                           Delaware
Trade Source International, Inc. (TSI)                       Delaware
TSI Prime Asia Limited (a wholly-owned
   subsidiary of TSI)                                        Hong Kong
Elitex Development Limited
   (a wholly-owned subsidiary of TSI)                        Hong Kong
Prime/Home Impressions, LLC
   (a 50% owned subsidiary of TSI)                           North Carolina
Design Trends, LLC
   (a 50% owned subsidiary of Craftmade)                     Delaware




ARTICLE 5
MULTIPLIER: 1,000


PERIOD TYPE 12 MOS
FISCAL YEAR END JUN 30 2000
PERIOD START JUL 01 1999
PERIOD END JUN 30 2000
CASH 1,171
SECURITIES 0
RECEIVABLES 17,846
ALLOWANCES 236
INVENTORY 15,322
CURRENT ASSETS 35,483
PP&E 11,873
DEPRECIATION 2,410
TOTAL ASSETS 50,101
CURRENT LIABILITIES 24,221
BONDS 8,588
PREFERRED MANDATORY 0
PREFERRED 32
COMMON 93
OTHER SE 16,834
TOTAL LIABILITY AND EQUITY 50,101
SALES 85,499
TOTAL REVENUES 85,499
CGS 55,640
TOTAL COSTS 55,640
OTHER EXPENSES 20,203
LOSS PROVISION 0
INTEREST EXPENSE 1,645
INCOME PRETAX 8,011
INCOME TAX 2,583
INCOME CONTINUING 4,280
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET INCOME 4,280
EPS BASIC 0.63
EPS DILUTED 0.63
BROKERAGE PARTNERS