(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

CRAFTMADE INTERNATIONAL, INC.

650 South Royal Lane, Suite 100

Coppell, Texas 75019

October 24, 2005

To Our Stockholders:

      You are cordially invited to attend our 2005 annual meeting of stockholders, which will be held Tuesday, November 29, 2005, at 9:30 a.m., local time, at our corporate office, 650 South Royal Lane, Suite 100, Coppell, Texas.

      We hold our annual meetings at our corporate office in order to provide our stockholders an opportunity to visit our facility, meet the employees and see your company at work. We feel this is the best way for our investors to see for themselves what we are all about.

      Please read these materials so that you’ll know what we plan to do at the meeting. Also, please sign and return the accompanying proxy card. This way, your shares will be voted as you direct even if you can’t attend the meeting. If you would like to attend, please see the instructions on “How to Attend the Meeting.”

CRAFTMADE INTERNATIONAL, INC.

650 South Royal Lane, Suite 100

Coppell, Texas 75019

NOTICE OF THE 2005 ANNUAL MEETING OF STOCKHOLDERS

       The annual meeting of stockholders of Craftmade International, Inc. (the “Company”) will be held on Tuesday, November 29, 2005, at 9:30 a.m., local time, at the Company’s office at 650 South Royal Lane, Suite 100, Coppell, Texas, for the following purposes:

      Only stockholders of record at the close of business on October 24, 2005, can vote at the meeting.

      A complete list of stockholders entitled to vote at the annual meeting will be maintained at the Company’s offices at 650 South Royal Lane, Suite 100, Coppell, Texas 75019, for ten days prior to the annual meeting.

      All stockholders are cordially invited to attend the annual meeting. Whether or not you plan to attend the annual meeting in person, please complete, sign and date the enclosed proxy and return it promptly in the accompanying envelope. If you do attend the annual meeting in person, you may withdraw your proxy and vote in person. Attendance at the annual meeting is limited to stockholders, their proxies and invited guests of the Company.

Coppell, Texas

October 24, 2005

CRAFTMADE INTERNATIONAL, INC.

650 South Royal Lane, Suite 100

Coppell, Texas 75019

Proxy Statement

For Annual Meeting of Stockholders

To be Held on Tuesday, November 29, 2005

GENERAL

      The Board of Directors (the “Board”) of Craftmade International, Inc. (the “Company”) is soliciting proxies for the 2005 annual meeting of stockholders. The annual meeting will be held on Tuesday, November 29, 2005, at 9:30 a.m., local time, at the Company’s office at 650 South Royal Lane, Suite 100, Coppell, Texas. This proxy statement, the form of proxy and annual report to stockholders were first mailed to stockholders on or about October 31, 2005.

Who Can Vote

      Record holders of common stock, par value $0.01 per share (the “Common Stock”), of the Company at the close of business on October 24, 2005 (the “Record Date”), may vote at the meeting. On the Record Date, 5,200,000 shares of Common Stock were outstanding. Each stockholder has one vote for each share of Common Stock held by that stockholder.

How You Can Vote

      Shares represented by a proxy in the form provided to you with this proxy statement will be voted at the annual meeting in accordance with your directions. To be valid and counted at the annual meeting, you must sign, date and return your proxy card to us.

      If you do not specify on your proxy card how you want to vote your shares, we will vote them:

Other Matters to be Acted Upon at the Meeting

      We do not know of any other matters to be presented or acted upon at the annual meeting other than those described above. Under our Bylaws, if any other matter is presented at the meeting on which a vote may properly be taken, the shares represented by proxies in the accompanying form will be voted in accordance with the judgment of the person or persons voting those shares.

Required Votes

      A majority of the shares of Common Stock entitled to vote, present in person at the annual meeting or represented by proxy at the annual meeting shall constitute a quorum at the annual meeting. For purposes of the quorum and the discussion below regarding the votes necessary to take stockholder action, stockholders of record who are present at the annual meeting in person or represented by proxy and who abstain, including brokers holding customers’ shares of record who cause abstentions to be recorded at the annual meeting, are considered stockholders who are present and entitled to vote, and they count toward the quorum.

      Brokers holding shares of record for customers generally are not entitled to vote on certain matters unless they receive voting instructions from their customers. “Uninstructed shares” means shares held by a broker who has not received instructions from its customers on such matters, and the broker has so notified the Company on a proxy form or has otherwise advised us that the broker lacks voting authority. “Broker non-votes” means the votes that could have been cast on the matter in question by brokers with respect to uninstructed shares if the brokers had received their customers’ instructions.

      Election of Directors. Directors are elected by a plurality of the votes of the shares represented in person or by proxy. Votes may be cast in favor of or withheld with respect to each nominee. Abstentions and broker non-votes will not be counted by us.

      Ratification of Independent Accountants. The affirmative vote of the majority of the shares present in person or represented by proxy and entitled to vote is required to ratify BDO Seidman, LLP as the Company’s independent accountants for 2006.

Revocation of Proxies

      You can revoke your proxy at any time before it is exercised in any of three ways:

How to Attend the Meeting

      We encourage all holders of Common Stock on the Record Date to attend the annual meeting. This will give you an opportunity to visit the Company’s facility, talk to management and vote your shares in person. If you are interested in attending, call our Corporate Secretary, Brad D. Heimann, at (972) 393-3800 for directions.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The table below sets forth, as of October 14, 2005 the number of shares of Common Stock and the percentage of outstanding shares owned of record by (i) each incumbent director and each nominee for director of the Company; (ii) each named executive officer of the Company; (iii) all directors and named executive officers of the Company as a group; and (iv) each person who beneficially owns more than five percent of the Common Stock. Except as otherwise noted, each named individual has sole voting and investment power with respect to such shares.

PROPOSAL ONE

ELECTION OF DIRECTORS

General

      Nine directors will be elected at this year’s annual meeting. To fill an existing vacancy on the Board, the Nominating and Corporate Governance Committee and the Board have decided to nominate Mr. Richard T. Walsh. Each director will serve until the next annual meeting and until he or she is succeeded by another director who has been duly elected and qualified.

      We will vote your shares as you specify on the enclosed proxy form. If you sign, date, and return the proxy form, but don’t specify how you want your shares voted, we will vote them for the election of all the nominees listed below. If unforeseen circumstances (such as death or disability) make it necessary for the Board of Directors to substitute another person for any of the nominees, we will vote your shares for that person. Proxies can’t be voted for the election of more than nine persons to the Board of Directors. Directors are elected by plurality vote, and cumulative voting is not permitted.

      Director Nomination Procedures. The Nominating and Corporate Governance Committee considers the appropriate balance of experience, skills and characteristics required of the Board of Directors. It seeks to ensure that at least a majority of the directors are independent under the rules of the NASDAQ Stock Market, that members of the Company’s Audit Committee meet the financial literacy requirements under the rules of the NASDAQ Stock Market, and that at least one of them qualifies as an “audit committee financial expert” under the rules of the SEC. Nominees for director are selected on the basis of their ability to bring sound business judgment to the Board’s deliberations; character and integrity; independence; ability to work with others and compatibility with other Board members; willingness and ability to devote the necessary time to the Company and Board responsibilities; community reputation and business contacts in the communities the Company serves; awareness of both the business and social environment within which the Company operates; business experience in highly competitive environments; public company experience; financial knowledge and experience; an understanding of marketing, technology, law, the impact of government regulations or other specific areas or disciplines; and any associations with organizations that have competitive lines of business or other conflicts of interest with the Company.

      All of the nominees for director are currently members of the Board of Directors with the exception of Richard T. Walsh, who is a nominee. The following sets forth a brief biography describing the principal occupation and certain other information about each nominee for director. Each nominee has consented to serve as a director if elected. The following information about the nominees was provided by the nominees.

Nominees

      James R. Ridings, age 55, has served as Chairman and Chief Executive Officer of the Company since 1986 and President since 1989. Mr. Ridings has also served as the President of Trade Source International, Inc., a Delaware corporation (“TSI”) and subsidiary of the Company, since October 2003. Mr. Ridings has been a director of the Company since its organization in 1985 and was a Vice President from 1985 to 1986. Between 1971 and 1984, Mr. Ridings was a sales representative with Kevco, Inc., Fort Worth, Texas, and its predecessor company, a wholesale distributor of ceiling fans, plumbing supplies and mobile home accessories. Mr. Ridings was elected a director of U.S. Home Systems, Inc. on July 15, 2004. Mr. Riding’s son-in-law, Brad D. Heimann, is the Executive Vice President of the Company.

      Clifford Crimmings, age 55, has served as Vice President of Marketing of the Company since its organization in 1985 and a director since 1987. Between 1969 and 1985, Mr. Crimmings was employed as a sales representative and then as a sales manager with Kevco, Inc. and its predecessor company.

      John DeBlois, age 52, has served as a director of the Company since October 1998, and as Executive Vice President of TSI, since July 1998. Mr. DeBlois served as Vice President of Sales of Trade Source International, Inc. a California corporation (“TSI California”), the predecessor of TSI, from 1987 to July 1998. In 1979, Mr. DeBlois purchased Regal-Lite Corp., a domestic lighting manufacturing company, which was merged into TSI California in 1987. Between 1978 and 1979, Mr. DeBlois served as a retail representative of Mosley, Halgarten, Eastbrook and Weedon, a regional brokerage firm. Between 1975 and 1977, Mr. DeBlois was a stockbroker for Paine Webber Group Inc. Mr. DeBlois received a B.B.A. degree in Economics from Tufts University in 1975.

      A. Paul Knuckley, age 55, has served as a director of the Company since October 1996. Mr. Knuckley has served since 1974 as President and Chief Executive Officer of Knuckley Inc., d.b.a. Ditch Witch of East Texas, and as owner and Vice-President of Witch Equipment Co., Inc. of Ft. Worth, Texas. Prior to 1974, Mr. Knuckley was employed by John Hancock Mutual Life Insurance Company as a life and health underwriter. Mr. Knuckley received a B.B.A. degree from Texas Tech University in 1971 in both Personnel and Administrative Management.

      Lary C. Snodgrass, age 56, has served as a director of the Company since October 1998. Mr. Snodgrass has been employed by Pickens, Snodgrass, Koch & Company, P.C., a public accounting firm, since 1973, serving as managing partner and president from 1980 to 1995 and as a retired partner since 2004. Between 1970 and 1973, Mr. Snodgrass was a senior accountant for Arthur Andersen & Co., an international public accounting firm. Mr. Snodgrass received a B.B.A. degree in Accounting from Texas Tech University in 1970.

Mr. Snodgrass has been a Certified Public Accountant since 1972. Mr. Snodgrass currently serves as an advisory director of Chase Bank — Fort Worth Region.

      William E. Bucek, age 67, has served as a director of the Company since October 2002. Mr. Bucek is the founder of Double B Foods, Inc., a Texas corporation, serving as President from 1971 until 1999, and currently serving as Chairman of the Board and Chief Executive Officer. Mr. Bucek has been a Director of Hill Bank & Trust, Weimar, Texas, since 1994. Mr. Bucek received a B.S. degree from Rice University in 1960.

      L. Dale Griggs, age 72, has served as a director of the Company since October 2002. Mr. Griggs is a retiree from a forty-five year banking career. Mr. Griggs served as Executive Vice President and Director of Overton Bank and Trust of Fort Worth, Texas, from 1983 through 1998 and as Executive Vice President of Frost Bank, Fort Worth, Texas, from 1998 through 2001. Mr. Griggs is currently the Director of First Security State Bank, Cranfills Gap, Texas. Mr. Griggs received a B.S. Degree in Management and Finance from Texas Christian University in Fort Worth, Texas. Mr. Griggs is also a graduate of Southwestern Graduate School of Banking of Southern Methodist University.

      R. Don Morris, age 65, has served as a director of the Company since October 2002. Mr. Morris became Senior Vice President and Chief Financial Officer of Michaels Stores, Inc. in January 1990 and in August 1990 he became an Executive Vice President. Mr. Morris retired from Michaels Stores in 1997. In 1998 he joined the Board of Directors of Jumbo Sports Inc. and served on its Audit and Compensation Committees during its time of bankruptcy. Mr. Morris graduated from Texas Tech University with an M.B.A. in 1962.

      Richard T. Walsh, age 70, is nominated to be a director of the Company. Since 1992, Mr. Walsh has been a business consultant with RT Enterprises in Bloomfield Hills, Michigan. From 1973 to 1992, Mr. Walsh served in various roles at Core Industries, Inc. (“Core Industries”), a diversified NYSE-listed company, including President, Chief Executive Officer and Director, President and Chief Operating Officer, and Vice President Finance. Prior to his career at Core Industries, Mr. Walsh spent over 16 years at Touche Ross & Co., an international accounting and consulting firm. Mr. Walsh received a Bachelor of Science degree in accounting from the University of Notre Dame in 1957.

      The Board of Directors recommends a vote FOR the election of each of the nominees for director named above.

Certain Relationships and Related Transactions

      The Company had a non-interest bearing note receivable from James R. Ridings, Chairman, President and Chief Executive Officer, for $50,000. The note was paid in full in August 2005.

Director Compensation

      Directors who are not otherwise salaried employees of the Company are compensated by payment of $5,000 per board meeting attended in consideration for such service. Committee members are not compensated for attending committee meetings held on the same day as board meetings. Committee members are compensated $2,000 for each committee meeting attended on days when no board meeting is held. Directors who are salaried employees do not receive any additional compensation for their attendance at board meetings.

      During fiscal 2005, the Company paid R. Don Morris a $5,000 monthly retainer for his role as chairman of the Audit Committee. In addition, Mr. Morris received $2,000 for every meeting attended at Craftmade offices. Beginning in May 2005, Lary C. Snodgrass received a retainer of $2,000 per month for his role as a member of the Audit Committee.

Meetings of the Board of Directors

      The Board of Directors met five (5) times during the fiscal year ended June 30, 2005. No incumbent director attended fewer than 75% of the total number of meetings of the Board of Directors and of the Board committees of which they were members during such period.

Committees of the Board of Directors

      The Company’s Board of Directors has four (4) standing committees: Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Qualified Legal Compliance Committee. The duties and members of these committees are as follows.

      Audit Committee. The Audit Committee has a charter adopted by the Board of Directors that sets forth its membership requirements, authority and responsibilities. The full text of the Audit Committee Charter can be found in the “Investor Relations — Governance” section of the Company’s website at www.craftmade.com. The Audit Committee is responsible for oversight of (i) the integrity of the Company’s financial statements and disclosures, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the qualifications and independence of the Company’s independent auditing firm (the “External Auditors”), (iv) the performance of the Company’s internal audit function and External Auditors, (v) the Company’s internal control systems, (vi) the Company’s process for monitoring compliance with the Business Ethics Policy (“Ethics Policy”), and (vii) establishing procedures for complaints relating to accounting, internal accounting controls, and auditing matters. The Audit Committee also meets with the External Auditors and with appropriate Company financial personnel about these matters. The functions of the Audit Committee also include recommending to the Board of Directors the appointment of the External Auditors (subject to ratification by the stockholders at the annual meeting), reviewing annually the Audit Committee Charter, approving certain other types of professional service rendered to the Company by the External Auditors and considering the possible effects of such services on the independence of such public accountants. Both the internal accounting department and the External Auditors periodically meet alone with the Audit Committee and always have unrestricted access to the Audit Committee. The Audit Committee currently consists of William E. Bucek, L. Dale Griggs, A. Paul Knuckley, R. Don Morris and Lary C. Snodgrass, each of whom is an outside director. The Board of Directors has determined that all members of the Audit Committee are independent directors under the rules of the NASDAQ Stock Market and the rules and regulations of the SEC. The Board of Directors has determined that Mr. Morris qualifies as an “audit committee financial expert” under applicable SEC and NASDAQ regulations. Mr. Morris is the Chairman of the Audit Committee, and four (4) meetings of the Audit Committee were held during the Company’s fiscal year ended June 30, 2005.

      Compensation Committee. The Compensation Committee has a charter adopted by the Board of Directors that sets forth its membership requirements, authority and responsibilities. The full text of the Compensation Committee Charter can be found in the “Investor Relations — Governance” section of the Company’s website at www.craftmade.com. The Compensation Committee is responsible for (i) assisting the Board of Directors in the discharge of its fiduciary responsibilities relating to the fair and competitive compensation of the Company’s Chief Executive Officer and other executives and (ii) preparing an annual report on executive compensation for inclusion in the Company’s proxy statement for the annual meeting of stockholders. The Compensation Committee currently consists of Messrs. Bucek, Griggs, Knuckley, Morris and Snodgrass, each of whom is an outside director. The Board of Directors has determined that all members of the Compensation Committee are independent directors under the rules of the NASDAQ Stock Market and the rules and regulations of the SEC. Mr. Knuckley is the Chairman of the Compensation Committee. The Compensation Committee met seven (7) times during the Company’s fiscal year ended June 30, 2005.

      Nominating and Corporate Governance Committee: The Nominating and Corporate Governance Committee consists of Messrs. Bucek, Griggs, Knuckley, Morris and Snodgrass, each of whom is an outside director and each of whom the Board of Directors has determined to be qualified as an independent director under the rules of the NASDAQ Stock Market and rules and regulations of the SEC.

      The Nominating and Corporate Governance Committee has a charter adopted by the Board of Directors that sets forth its membership requirements, authority and responsibilities. The full text of the Nominating and Corporate Governance Committee Charter can be found in the “Investor Relations — Governance” section of the Company’s website at www.craftmade.com. The Nominating and Corporate Governance Committee recommends the number of board positions to be filled in accordance with the Bylaws of the Company and the persons to be nominated to serve in those positions. In this regard, the Nominating and

Corporate Governance Committee considers the performance of incumbent directors in determining whether such directors should be nominated to stand for reelection. The Nominating and Corporate Governance Committee also reviews the recommendations of the Chief Executive Officer related to the appointment of executive officers and proposed personnel changes related to such officers and is responsible for conducting an annual review of the Company’s Business Ethics Policy. During the Company’s fiscal year ended June 30, 2005, the Nominating and Corporate Governance Committee held one (1) meeting. Each of the members of the Nominating and Corporate Governance Committee attended the meetings.

      The Nominating and Corporate Governance Committee will consider written proposals from stockholders for nominees for director and has adopted a policy for the consideration of such nominees. In order for a stockholder to nominate an individual to be a director of the Company, the nominating stockholder must provide the Company with timely and complete written notice of the individual to be nominated to the Company’s Board of Directors. In order to be considered timely, a nomination for the election of a director must be received at the principal executive offices of the Company no less than one hundred twenty (120) days before the anniversary date of the Company’s proxy statement released to stockholders in connection with the previous year’s annual meeting, if the election is to be at an annual meeting, or one hundred twenty (120) days before any other meeting date for an election to be held at any other meeting. A stockholder nomination for director must set forth, as to each nominee such stockholder proposes to nominate the name and business or residence address of the nominee; the class and number of shares of Common Stock of the Company which are beneficially owned by the person; the total number of shares that, to the knowledge of the nominating stockholder, would be voted for such person; and the signed consent of the nominee to serve, if elected. The notice by the nominating stockholders shall also set forth the name and residence address of the stockholder and the class and number of shares of Common Stock of the Company which are beneficially owned by the stockholder. Any such nominations should be submitted to the Nominating and Corporate Governance Committee, c/o the Corporate Secretary of the Company, 650 S. Royal Lane, Suite 100, Coppell, TX 75019. Properly submitted recommendations for director by stockholders will be evaluated in the same manner as other nominees.

      The process for identifying and evaluating nominees to the Board of Directors is initiated by identifying a candidate who meets the criteria for selection as a nominee and has the specific qualities or skills being sought based on input from members of the Board of Directors. The Nominating and Corporate Governance Committee evaluates these candidates by reviewing the candidates’ biographical information and qualification and checking the candidates’ references. Qualified nominees are interviewed by at least one member of the Nominating and Corporate Governance Committee. Using the input from such interview and other information obtained by them, the Nominating and Corporate Governance Committee evaluates whether such prospective candidate is qualified to serve as a director and whether the committee should recommend to the Board of Directors that the Board nominate the prospective candidate or elect such candidate to fill a vacancy on the Board. Candidates recommended by the Nominating and Corporate Governance Committee are presented to the Board for selection as nominees to be presented for the approval of the stockholders or for election to fill a vacancy. The Committee and the Board have determined to fill an existing Board vacancy. Accordingly, there is one new nominee to the Board for election at the 2005 Annual Meeting of Stockholders, Richard T. Walsh. The committee will evaluate the size and composition of the Board prior to the 2006 Annual Meeting of Stockholders.

      With the exception of Mr. Walsh, the Company has not received any nominations for persons to serve on the Board of Directors from any stockholder of the Common Stock of the Company and has not rejected any director candidates put forward by a stockholder or group of stockholders who beneficially owned more than five percent (5%) of the Common Stock of the Company for at least one year at the time of the recommendation. The Nominating and Corporate Governance Committee received a nomination from George P. Schwartz, President of Schwartz Investment Counsel, Inc., to nominate Mr. Walsh to serve on the Board of Directors. The Company has not paid any third party a fee to assist in the process of identifying or evaluating candidates.

      Qualified Legal Compliance Committee. The Qualified Legal Compliance Committee is responsible for handling reports of evidence of a material violation of the securities laws or a breach of a fiduciary duty by the

Company or its officers, directors, employees, or agents. The Qualified Legal Compliance Committee has authority and responsibility to inform the Company’s Chief Executive Officer of any report of evidence of these violations, to determine whether an investigation is necessary, and to take appropriate action to address these reports. If the committee determines that an investigation is necessary or appropriate, it has the authority to notify the Audit Committee or the full Board of Directors, initiate an investigation, and retain outside experts. At the conclusion of any such investigation, the Qualified Legal Compliance Committee may recommend an appropriate response to the evidence of a material violation and inform the Chief Executive Officer and Board of Directors of the results of the investigation and the appropriate remedial measures to be adopted. The Audit Committee serves as the Qualified Legal Compliance Committee. The Qualified Legal Compliance Committee currently consists of Messrs. Bucek, Griggs, Knuckley, Morris and Snodgrass. The Qualified Legal Compliance Committee meets on an as needed basis. Accordingly, during 2005, the Qualified Legal Compliance Committee did not meet.

Communication with Board Members

      The Board of Directors encourages open, frank, and candid communications with Company security holders. Accordingly, the Board, with the approval of the majority of independent directors, has established a process whereby security holders may communicate with the Board as a whole, or any individual member of the Board. This communication process shall be in the form of written correspondence. If a security holder desires to send a communication to the Board, or a specific Board member, the security holder must prepare the communication in written form and mail or hand deliver this communication to the following address:

Board of Directors

c/o Brad D. Heimann

Executive Vice President

Craftmade International, Inc.

650 South Royal Lane, Suite 100

Coppell, Texas 75019

      All communications so marked and received by the Company shall be recorded and maintained in a log of all correspondence sent to the Board or any individual Board member. All appropriate security holder communication addressed to the Board will be forwarded to the Nominating and Corporate Governance Committee of the Board for consideration at its next committee meeting. Appropriate security holder communications addressed to individual directors, shall be forwarded to the designated director.

Business Ethics Policy

      The Company has adopted a Business Ethics Policy, which is applicable to the directors, executive officers and all employees of the Company, including the principal executive officer, principal financial officer and controller. The Business Ethics Policy is available in the “Investor Relations — Governance” section of the Company’s website at www.craftmade.com.

Executive Officers

      The executive officers of the Company, who are elected by the Board of Directors of the Company and serve at its discretion, are as follows:

The business experience of Mr. Ridings, Mr. Crimmings and Mr. DeBlois is included under “Proposal One: Election of Directors — Nominees.”

      Brad D. Heimann, age 31, has served as the Executive Vice President of the Company since October 15, 2004, and served as Interim Chief Financial Officer from November 18, 2004 through October 3, 2005. Mr. Heimann was a special projects manager for the Company from 1998 until 2001 and Director of Operations of the Company from 2001 until October 15, 2004. Mr. Heimann earned a Masters of Business Administration from Southern Methodist University. Mr. Heimann’s father-in-law is James R. Ridings, Chairman, Chief Executive Officer and President of the Company.

      J. Marcus Scrudder, age 38, was appointed Chief Financial Officer effective October 3, 2005. Prior to joining Craftmade, Mr. Scrudder served as Operations Manager at privately-owned Crown Equipment Corporation after it purchased the assets of Shannon Corporation in 2004, where Mr. Scrudder was employed since 1997 and served as Chief Financial Officer since 1998. Crown Equipment Corporation is the leading brand of electric lift trucks in North America and the sixth largest manufacturer of such equipment in the world. Mr. Scrudder attended the Executive Program at Southern Methodist University where he received a Masters of Business Administration.

      Michael L. Patton, age 36, has served as Chief Accounting Officer of the Company since October 25, 2004. Prior to Craftmade, Mr. Patton worked for Arista Communication, Inc. (“Arista”), an affinity marketing company, from October 2003 to July 2004, as its Controller and subsequently its Chief Financial Officer . Prior to working for Arista, Mr. Patton, spent 11 years at PricewaterhouseCoopers LLP and worked in the Dallas, New York and London offices. Mr. Patton also attended Baylor University in Waco, Texas, where he earned a Bachelor of Business Administration in Accounting.

Executive Compensation

      The following table sets forth compensation awarded by the Company to its Chief Executive Officer and its four other most highly compensated executive officers (the “named executive officers”), based on salary and bonus earned, whose total compensation exceeded $100,000, rendered during the fiscal years ended June 30, 2005, 2004 and 2003.

Summary Compensation Table

Option Exercises and Holdings

      The following table summarizes the number and value of options exercised during the fiscal year ended June 30, 2005, if any, as well as the number and value of unexercised options, as of June 30, 2005, for each of the named executive officers of the Company.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values

Employment Contracts and Termination of Employment Arrangements

      Oher Employment Agreement. Effective October 25, 1999, Kathleen Oher entered into an employment agreement with the Company (the “Oher Employment Agreement”). The term of the Oher Employment Agreement was initially three years. After the initial term, the Oher Employment Agreement was extended for two additional one-year terms. At October 25, 2003, the Oher Employment Agreement was extended for a one-year term. Ms. Oher resigned her position with the Company and its subsidiaries effective November 17, 2004.

      Pursuant to the Oher Employment Agreement, Ms. Oher’s salary was to be increased proportionate to any increases in the salary of the Chief Executive Officer of the Company, subject to certain conditions. In addition, Ms. Oher was entitled to receive an annual bonus based on the performance of the Company, with the standards of such bonus to be comparable to the standards concerning receipt of any bonus by the Chief Executive Officer of the Company. Pursuant to the Oher Employment Agreement, Ms. Oher was entitled to certain other benefits, including the right to participate in any stock option plan of the Company that was provided to the Company’s Chief Executive Officer. Ms. Oher also received a grant of options to purchase 50,000 shares of Common Stock, with an exercise price of $6.75, which vested over five years. The Oher Employment Agreement also contained certain confidentiality and non-competition provisions.

      Oher General Release and Severance Agreement. On November 18, 2004, the Company entered into a General Release and Severance Agreement (the “Agreement”) with Kathleen B. Oher, who previously served as a Director and Chief Financial Officer of the Company. Pursuant to the Agreement, the Company paid Ms. Oher $173,981. The Agreement also contains mutual releases, in which the Company and Ms. Oher each release the other for all claims demands or suits arising prior to the date of the execution of the Agreement.

Board Compensation Committee Report on Executive Compensation

      The Compensation Committee is responsible for reviewing and recommending compensation awards for the Company’s senior executives, including the Chief Executive Officer. The Compensation Committee currently consists of William E. Bucek, L. Dale Griggs, A. Paul Knuckley, R. Don Morris and Lary C. Snodgrass, each of whom is an outside director.

      Executive Compensation: Philosophy and Program Components. The Compensation Committee believes that the overall objective of the executive compensation program should be to encourage and reward enhancement of stockholder value. The Compensation Committee believes that the executive compensation program should be a comprehensive plan that will (i) motivate executives for long-term management of the Company resulting in increased stockholder value; (ii) reward effective management for the Company through annual performance evaluations; and (iii) attract and retain key executives through competitive salaries and other incentives. The Compensation Committee believes that the proper levels and types of compensation should be determined unconstrained by industry median compensation statistics or by the Company’s own past compensation practices and levels. The two primary components of executive compensation are currently base salary and cash bonuses. Executives also participate in certain benefit programs available to other salaried employees.

      Base Salary and Bonus. In the fiscal year ended June 30, 2005, base salaries and bonuses for executive officers were based upon the individual’s responsibilities, experience and expected performance, taking into account, among other things, the individual’s initiative, contributions to the Company’s overall performance and handling of special projects. Base salaries for executive officers generally are reviewed periodically for possible adjustment, but are not necessarily changed that frequently.

      At various times in the past, the Company has adopted certain broad-based employee benefit plans in which the executive officers and other key management employees have been permitted to participate, including the employee’s 401(k) plan and the life and health insurance benefit plans available to all salaried employees. Benefits under these plans are not typically directly or indirectly tied to the Company’s performance.

      Chief Executive Officer Compensation. Mr. Ridings’ base salary for the fiscal year ended June 30, 2005 was $357,536, a 4% increase from $344,360 earned in the prior fiscal year. No bonus was paid to Mr. Ridings for the fiscal year ended June 30, 2005. As with all executive officers, Mr. Ridings’ bonus compensation is linked to individual performance and the Company’s profitability.

      Within the framework described above, the Compensation Committee determines Mr. Ridings’ base salary by reviewing his individual contributions to the Company’s business, level of responsibility, and career experience. The Compensation Committee also reviews the salary structure of chief executive officers of other companies in the industry. The committee does not think narrow quantitative measures or formulas are sufficient for determining Mr. Ridings’ base salary. The committee does not give specific weights to the factors considered, but the primary factor is Mr. Ridings’ individual contributions to the business.

      Mr. Ridings currently does not have any stock options to purchase Common Stock, and, as a result of his current ownership levels of Common Stock, it is not anticipated that he will be awarded stock options in the future. The Company plans to reserve the stock options for future issuance to the Company’s employees and other members of the Company’s management.

      In fiscal year ended June 30, 2005, Mr. Heimann, Executive Vice President and Secretary of the Company, who also served as Interim Chief Financial Officer from November 18, 2004 to October 3, 2005, received a base salary of $142,583, a 25% increase from a base salary of $113,811 earned in the prior fiscal year. Mr. Heimann also received a $25,000 bonus for the fiscal year ended June 30, 2005.

      Mr. Crimmings, Vice President of Marketing of the Company, received a base salary of $206,334, a 4% increase from a base salary of $198,695 earned in the fiscal year ended June 30. No bonus was paid to Mr. Crimmings for the fiscal year ended June 30, 2005.

      Mr. DeBlois, Vice President of Marketing of the Company, received a base salary of $301,122, a 1% increase from a base salary of $298,004 earned in the prior fiscal year. No bonus was paid to Mr. DeBlois for the fiscal year ended June 30, 2005.

      Mr. Patton, Chief Accounting Officer, received a base salary of $86,500 for the fiscal year ended June 30, 2005. There was no increase over the prior year since Mr. Patton began his employment with the Company on October 25, 2004. Mr. Patton also received a $15,000 bonus for the fiscal year ended June 30, 2005.

Compensation Committee Interlocks and Insider Participation

      No member of the Compensation Committee is or has been an officer or employee of the Company or any of it subsidiaries. The members of the Compensation Committee had no other relationships with the Company requiring disclosure pursuant to Item 404 of SEC Regulation S-K. No executive officer of the Company served as a member of the Compensation Committee (or other Board committee performing similar functions or, in the absence of any such committee, the entire Board of Directors) of another corporation whose executive officer served on the Compensation Committee. No executive officer of the Company served as a director of another corporation whose executive officers served on the Compensation Committee. No executive officer of the Company served as a member of the Compensation Committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire Board of Directors) of another corporation an executive officers of which served as a Director of the Company.

Audit Committee Report

      In this section below, financial and accounting management policies and practices of the Company are described.

      Composition. The Audit Committee of the board of directors is composed of five independent directors, as defined under Rule 4200(a)(15) of the National Association of Securities Dealers’ listing standards. The Audit Committee presently consists of William E. Bucek, L. Dale Griggs, A. Paul Knuckley, R. Don Morris and Lary C. Snodgrass. The Board of Directors has adopted a written charter for the Audit Committee.

      Responsibilities. The responsibilities of the Audit Committee include recommending to the Board of Directors an accounting firm to be engaged as the Company’s independent accountants. Management is responsible for the Company’s internal controls and financial reporting process. The independent accountants are responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with auditing standards generally accepted in the United States of America and for issuing a report thereon. The Audit Committee’s responsibility is to oversee these processes.

      Review with Management and Independent Accountants. In this context, the Audit Committee has met and held discussions with management and the independent accountants. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, and the Audit Committee has reviewed and discussed the consolidated financial statements with management and the independent accountants. The Audit Committee discussed with the independent accountants matters required to be discussed by Statement on Auditing Standards No. 61, “Communication with Audit Committees.”

      The Company’s independent accountants also provided to the Audit Committee the written disclosures required by Independent Standards Board Standard No. 1, “Independent Discussions with Audit Committees,” and the Audit Committee discussed with the independent accountants, BDO Seidman, LLP, the firm’s independent accountants.

      Summary. Based upon the Audit Committee’s discussions with management and the independent accountants and the Audit Committee’s review of the representations of management, and the report of the independent accountants to the Audit Committee, the Audit Committee recommended that the Board of Directors include the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended June 30, 2005 as filed with the Securities and Exchange Commission.

Stock Performance Graph

      The following graph provides an indicator of and compares the percentage change of cumulative total shareholder return of the Company’s Common Stock against the cumulative total return of the Russell 2000 Index and the Nasdaq Composite Index. This graph assumes $100 was invested on June 30, 2000 in the Company’s Common Stock, the Russell 2000 Index and the Nasdaq Composite Index. Both the Russell 2000 Index and the Nasdaq Composite Index exclude the Company. This graph also assumes that the Company’s quarterly dividend was reinvested in the Company’s Common Stock.

      The historical stock price performance of the Company’s Common Stock shown on the graph above is not necessarily an indication of future stock performance.

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

Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors, executive officers and beneficial owners of more than 10% of the outstanding shares of Common Stock to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Otherwise, to the Company’s knowledge, based solely upon its review of the copies of such forms received by it and written representations from reporting persons, the Company believes that all such reports were submitted on a timely basis during the fiscal year ended June 30, 2005.

PROPOSAL TWO

RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTING FIRM

      On May 13, 2005, Craftmade International, Inc. (the “Company”) dismissed PricewaterhouseCoopers, LLP (“PwC”) as the Company’s independent registered public accounting firm. In accordance with the terms of the Audit Committee Charter, the Audit Committee of the Board of Directors of the Company (the “Audit Committee”) solely participated in and approved the decision to dismiss PwC.

      PwC’s reports on the Company’s consolidated financial statements for the years ended June 30, 2004 and June 30, 2003 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principle.

      During the years ended June 30, 2004 and June 30, 2003 and through May 13, 2005, there were no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of PwC would have caused it to make reference thereto in connection with its reports on the financial statements for such years.

      During the years ended June 30, 2004 and June 30, 2003 and through May 13, 2005, there have been no reportable events, as defined in Item 304 of Regulation S-K, except as noted in the following paragraphs:

      These reportable conditions and the material weakness, and the Company’s efforts to remediate them are described in Item 9A of the Company’s Form 10-K for the year ended June 30, 2004, as filed with the SEC on September 28, 2004, and the Company’s Form 10-Q for the quarters ended September 30, 2004, as filed with the SEC on November 9, 2004; December 31, 2004, as filed with the SEC on February 9, 2005; and March 31, 2005, as filed with the SEC on May 11, 2005.

      The Company furnished a copy of the Current Report on Form 8-K, as filed with the SEC on May 19, 2005, to PwC and requested that PwC furnish the Company with a letter addressed to the Commission stating whether or not it agrees with the statements made by the Company herein in response to Item 304(a) of Regulation S-K and, if not, stating the respects in which it does not agree. A copy of such letter is attached as Exhibit 16.1 to the Current Report on Form 8-K as filed with the SEC on May 19, 2005.

      On May 18, 2005, the Company engaged BDO Seidman, LLP (“BDO”) as the Company’s new independent registered public accounting firm to audit the Company’s financial statements, to audit the Company’s internal controls over financial reporting and to perform procedures related to the financial statements included in the Company’s quarterly reports on Form 10-Q for the year ending June 30, 2005. In

accordance with the terms of the Audit Committee Charter, the Audit Committee solely participated in and approved the decision to engage BDO. Prior to engaging BDO as its independent registered public accounting firm, the Company did not consult with or obtain oral or written advice from BDO regarding any of the matters described in Item 304(a)(2)(i) of Regulation S-K or Item 304(a)(2)(ii) of Regulation S-K.

      Accordingly, BDO is nominated as the Company’s independent public accountants in 2006. The Audit Committee and the Board believe that BDO offers the best quality and service for a company of Craftmade’s size. Partners and employees of the firm engaged in audits are periodically changed, providing the Company with new expertise and experience. Representatives of BDO have direct access to members of the Audit Committee and regularly attend its meetings. Representatives of BDO will attend the annual meeting to answer appropriate questions and make a statement if they desire.

      Aggregate fees for professional services rendered for the Company by BDO and PricewaterhouseCoopers for the years ended June 30, 2005 and 2004 were as follows:

      Audit Fees. For the years ended June 30, 2005, these fees were for professional services rendered for the audits of the consolidated financial statements, audits of internal control over financial reporting, reviews of the interim financial statements, reviews of filings of Forms 10-Q and 10-K with the Securities and Exchange Commission, and the evaluation by the Company’s management and independent auditors of the proper interpretation of FIN 46 with respect to the Company’s 50% owned subsidiaries. For the years ended June 30, 2004, these fees were for professional services rendered for the audits of the consolidated financial statements, reviews of the interim financial statements, reviews of filings of Forms 10-Q and 10-K with the Securities and Exchange Commission.

      Audit Related Fees. For the year ended June 30, 2005, these fees related to subscription of a technical accounting research facility. For the year ended June 30, 2004, these fees related to consultation with the Company regarding compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

      Tax Fees. Tax fees paid to PricewaterhouseCoopers for the years ended June 30, 2005 and 2004 were related to the preparation of tax returns, tax planning and tax advice.

      There were no other fees paid to BDO or PricewaterhouseCoopers.

Audit Committee Pre-Approval Policies and Procedures

      The Audit Committee has adopted policies and procedures for pre-approving all audit and non-audit services performed by the Company’s independent auditor. Except as noted below, no audit services or non-audit services shall be provided to the Company by the independent auditor unless first pre-approved by the Audit Committee and unless permitted by applicable securities laws and the rules and regulations of the SEC. If the Audit Committee approves an audit service within the scope of the engagement of the independent auditor, such audit service shall be deemed to have been pre-approved.

      Pre-approval shall not be required for non-audit services provided by the independent auditor, if (i) the aggregate amount of all such non-audit services provided to the Company constitutes not more than the five percent (5%) of the total amount of revenues paid by the Company to the independent auditor during the fiscal year in which such non-audit services are provided, (ii) such non-audit services were not recognized by the Company at the time of the independent auditor’s engagement to be non-audit services, and (iii) such

non-audit services are promptly brought to the attention of the Audit Committee and approved by the Audit Committee prior to the completion of the audit.

      The Audit Committee may delegate to one or more members of the Audit Committee the authority to grant pre-approval of certain non-audit services. The decision of any member to whom such authority is delegated to pre-approve non-audit services shall be presented to the full Audit Committee for its approval at its next scheduled meeting.

      The Audit Committee and the Board of Directors recommend a vote FOR BDO Seidman, LLP as independent accountants for 2006.

STOCKHOLDER PROPOSALS AND OTHER MATTERS

      Any stockholder who intends to present a proposal at the 2006 Annual Meeting of Stockholders, and who wishes to have a proposal included in the Company’s proxy statement for that meeting, must deliver the proposal to the Secretary of the Company at the Company’s executive offices in Coppell, Texas, for receipt no later than July 1, 2006. A stockholder proposal submitted outside of the processes established in Regulation 14a-8 promulgated by the Securities and Exchange Commission will be considered untimely September 20, 2006.

      The cost of soliciting proxies will be borne by the Company. In addition to solicitation by mail, certain employees of the Company, who will receive no special compensation therefore, may solicit proxies in person or by telephone or telegraph. No additional written materials besides the proxy statement have been authorized or will be employed in connection with the solicitation of proxies.

      The annual report to stockholders for the fiscal year ended June 30, 2005 is enclosed with this proxy statement. The annual report does not form any part of material for the solicitation of proxies.

Appendix A

CRAFTMADE INTERNATIONAL, INC.

Audit Committee Charter

      This Audit Committee Charter (“Charter”) sets forth the purpose and membership requirements of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Craftmade International, Inc. (the “Company”) and establishes the authority and responsibilities delegated to it by the Board.

      1.     Purpose. The Committee has oversight of (i) the integrity of the Company’s financial statements and disclosures, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the qualifications and independence of the Company’s independent auditing firm (the “External Auditors”), (iv) the performance of the Company’s internal audit function and External Auditors, (v) the Company’s internal control systems, (vi) the Company’s process for monitoring compliance with the Business Ethics Policy (“Ethics Policy”), and (vii) establishing procedures for complaints relating to accounting, internal accounting controls, and auditing matters.

      2.     Qualifications of Members and Compensation.

      3.     Authority.

      4.     Meetings.

      5.     Pre-Approval Requirements.

      6.     External Auditor Oversight.

      7.     Internal Auditing. The Committee shall annually evaluate the need for an internal auditing department and report to the Board its findings.

      8.     Financial Statements and Disclosure Oversight.

      9.     Ethics Policy Oversight. The Committee shall periodically, at its discretion, inquire of management and the External Auditor as to their knowledge of (i) any violation of the Ethics Policy, (ii) any waiver of compliance with the Ethics Policy, and (iii) any investigations undertaken with regard to compliance with the Ethics Policy. The Committee shall not have the power to grant waivers to the Ethics Policy. Any waiver of the Ethics Policy with respect to a director or executive officer may only be granted by the Board. All waivers

granted by the Board shall be promptly reported to the entire Board and be publicly disclosed as required by the rules and regulations of the SEC and NASDAQ.

      10.     Related Party Transactions. The Company shall not enter into a related party transaction unless such transaction is approved by the Committee after a review of the transaction by the Committee for potential conflicts of interest. A transaction will be considered a “related party transaction” if the transaction would be required to be disclosed under Item 404 of Regulation S-K.

      11.     Special-Purpose Entities and Off-Balance Sheet Transactions. The Committee shall periodically meet with management and the External Auditor to review and assess all “special-purpose” entities of the Company and all complex financing transactions involving the Company, including all related off-balance sheet accounting matters.

      12.     Assessments and Reports.

      13.     General.

*****

Appendix B

September 8, 2005

BUSINESS ETHICS POLICY

OF

CRAFTMADE INTERNATIONAL, INC.

      The purpose of this Business Ethics Policy (this “Policy”) is to describe standards of conduct and business ethics expected of the directors, officers and employees (the “Covered Persons”) of Craftmade International, Inc. and all of its subsidiaries and affiliates (the “Company” or “Craftmade”). If a situation arises with respect to this Policy about which any Covered Person may have a concern, question or require an interpretation, the matter should be reviewed promptly with Ric DeCastro, the Company’s officer in charge of implementing these policies (the “Policies Officer”). Unless otherwise specifically noted, the guidelines outlined in the Policy apply across the Company, in all businesses, states, regions, and countries. The Company expects its Covered Persons to exercise the highest degree of professional business ethics in all actions they undertake on behalf of the Company. In furtherance of that objective the Company expects its Covered Persons to act in accordance with the policies set forth herein at all times. The policies will be strictly enforced. The Company will take disciplinary action (including, where appropriate, dismissal) with respect to those involved in any violations of the standards. In addition, in the event that acts or omissions of a Covered Person are illegal and subject to criminal penalties, the Company will seek legal counsel to determine the course of action to be taken by the Company with respect to such acts or omissions and then act accordingly.

GENERAL STATEMENT

COMMUNICATIONS

      The Chief Executive Officer (“CEO”) and senior officers are responsible for making public communications about the financial and business condition of the Company and are to cause full, fair, accurate, timely and understandable disclosure in reports and documents filed with the Securities and Exchange Commission and in other public communications about the Company.

Authorized Spokespersons

      The Company speaks to the financial community and its stockholders through authorized representatives. The Chairman and the CEO, Executive Vice President and the Chief Financial Officer (“CFO”) are authorized to communicate on behalf of the corporation to analysts, securities market professionals and major stockholders of the corporation.

      Other officers or employees of the corporation may from time to time communicate with analysts and investors as part of the Company’s investor relations program. In such instances, an authorized representative will also be present. No employee is authorized to communicate business or financial information about the Company that is non-public, material information, except through the Company sanctioned public disclosure or for business purposes under a non-disclosure agreement.

      Employees, except as specified in this policy, shall not communicate to analysts and investors and shall refer all questions to the head of Investor Relations or, in his or her absence, another authorized representative.

Analyst Communications

      The Company participates in conferences sponsored by securities firms and other investor conferences. In the event of the release of material information, the Company will issue a media release describing the information. The Company may, in some circumstances, also file a Form 8-K providing the same information. The Company will observe a “quiet period.” A “quiet period” is a period of time during which the Company will not engage in discussions with analysts. The Company will notify the public of the timing of the quiet period by posting this information on its web-site.

MISUSE OF “INSIDER INFORMATION”

      Covered Persons who know of any material fact about the Company, a customer or a supplier, that has not been disclosed to the public (commonly known as “insider information”) may not engage in any transaction in the Company’s or such other corporations’ securities until such information has been disclosed to the public. Neither may Covered Persons directly nor indirectly engage in transactions through their families or others while in possession of insider information. In addition, Covered Persons may not provide insider information to other persons. Insider information is information that, if known, could affect an investor’s decision to buy or sell the Company’s or other corporations’ securities. Examples of such information include sales and earnings figures, plans for stock splits or dividends, proposed acquisitions or mergers, new product lines, etc. Improper use of insider information can lead to civil and criminal actions against the Covered Person and the Company. Covered Persons with questions about this should consult with the CFO prior to trading in the Company’s, its customers or suppliers’ or other corporations’ securities.

      The Company will also talk to individual analysts to provide additional background information concerning its business. Similarly, the Company will continue to participate in other public forums at which analysts or investors could be present, including industry seminars, trade shows, employee and annual stockholder meetings. If the Company determines that material, non-public information inadvertently has been disclosed in these meetings, appropriate public disclosure will be made promptly. The Company does not endorse analyst projections and does not update changes going forward. Further, there should be no written exchange of comments with analysts; however, a record of any comments should be filed with our Investor Relations department for record purposes.

WORKPLACE ACTIVITIES

      The Company is committed to providing a work environment where all employees can work together comfortably and productively. To this end, the Company supports and promotes the concept of equal employment opportunity in accordance with all applicable laws and guidelines and will not tolerate the discrimination of individuals with regard to race, color, religion, natural origin, sex, age, disability, pregnancy or veteran status. In addition, the Company will not allow verbal or physical conduct by an Employee that harasses, disrupts or interferes with another’s work performance or that creates an intimidating, offensive or hostile environment. An employee who is found to have engaged in the discrimination or harassment of another employee will be subject to disciplinary action, up to and including discharge. For further information regarding the Company’s workplace policies, please see the Company’s Employee Guidelines.

POLITICAL ACTIVITIES AND CONTRIBUTIONS

      The Company will not make any contribution or expenditure to or for any political party, committee or candidate for any public office, or to any person for any political purpose whatsoever, regardless of whether it is proposed to be made in the United States or in a foreign country or whether it would or would not be in violation of local law. “Contribution or expenditure” includes any direct or indirect payment, distribution, loan, advance, deposit, gift, purchase of tickets to dinners or other fund raising events, services (including transportation), equipment or any other thing of value made to or for political candidates, parties or committees.

      Although the Company encourages all Covered Persons to participate individually in civic affairs and in the political process, the Company will not reimburse any Covered Person for any expenses incurred in connection with those activities. Covered Persons who engage in civic or political affairs must do so on their own time and at their own expense and may not use Company facilities or resources in doing so without permission from the Company’s Policies Officer.

      Any Covered Person requested by another Covered Person of the Company to contribute Company time, money, facilities or resources to a political campaign or party should immediately decline to do so, stating that this Company’s corporate policy prohibits its involvement in or support of political activities. The Covered Person should promptly report the request in accordance with the reporting procedures described on page 10.

COMPUTER SECURITY AWARENESS AND CONFIDENTIALITY

      Covered Persons should not, without prior written authorization from the appropriate authority, acquire, use, access, copy, remove, modify, alter or disclose to any third parties, any confidential information for any purpose other than to perform their job responsibilities or in furtherance of expressly stated Company-sponsored activities (such as payroll deductions for United Way).

      All software and data on Company computers, whether in production or being tested by the Company, are the sole and exclusive property of the Company. Each officer or employee is responsible for protecting and preserving data for Company use.

      Officers and employees should not use on any Company computer any software that is not properly licensed. No data should be downloaded from bulletin boards or network services without written authority from the appropriate authority. Additionally, the data must be scanned by virus detection software immediately. Officers and employees should not run personal software on Company computers without prior written authorization from the appropriate authority. Under no circumstances should officers or other employees duplicate Company-owned or licensed software without prior written authorization from the appropriate authority. Such software includes that which is externally purchased or internally developed. The copying of such software may be illegal, as outlined in the software licensing agreement, and could result in fines and penalties to the Company and/or the particular officer or employee.

      Officer and employee passwords must be protected from disclosure to any individuals. Officers and other employees should protect any Company-owned or provided personal computer to ensure that its data,

software, and hardware are not misused. Each officer and other employee assumes responsibility for all activity performed with the use of his or her identification or password.

      Should a Covered Person become aware of a breach in security of any kind, such Covered Person should immediately notify the appropriate authority. Covered Persons should take all appropriate action, whether by instruction, agreement or otherwise, to ensure the protection, confidentiality and security of confidential information.

PAYMENTS TO GOVERNMENT OFFICIALS AND PERSONNEL

      The Company’s relationships with governmental agencies and their personnel in the United States and foreign countries shall be conducted so that full disclosure of the conduct will not impugn or jeopardize the Company’s integrity or reputation. Accordingly, payments to government personnel, including gifts of substantial value or lavish entertainment, shall not be permitted, whether the payment is made by use of the Covered Person’s personal funds or assets or those of the Company, and whether made directly or indirectly through consultants, advisors, suppliers, customers or others. This prohibition shall not prevent the Company from engaging in business transactions with governmental employees who may also be engaged in private business, provided such transactions are approved by the Company’s Policies Officer. If any proposed transaction may exceed $1,000 in value, the Company’s Policies Officer shall submit the proposal to the Audit Committee for approval.

USE OF AGENTS AND OTHERS TO ASSIST IN OBTAINING

AND PERFORMING CONTRACTS OR SALES

      From time to time the Company may elect to use special consultants, distributors, representatives and agents to assist in obtaining sales or performing contracts. These representatives must be bona fide professional individuals or organizations, they must render bona fide services, and their remuneration must be limited to a reasonable fee for their services. Any and all services rendered by these representatives must be pursuant to a written contract executed by an officer of the Company. No representative may be employed by this Company if connected, directly or indirectly, to the prospective customer or to an official of a prospective customer, unless authorized in advance in writing by an officer of the Company. If the prospective customer is an agency or political subdivision of a government or if the fees or remuneration to the proposed representative could exceed $1,000 annually, the Covered Persons involved should inform the Company’s Policies Officer who shall submit the arrangement to the Audit Committee for approval.

RECORDING AND AUDITING TRANSACTIONS

      No Covered Person shall intentionally falsify any memorandum, record or document of the Company or intentionally make a materially false or misleading statement to an accountant in connection with any examination or audit of the Company’s financial affairs. Any request of a Covered Person to do so should be promptly reported in accordance with the procedures described on page 10.

      Authority to open and maintain bank accounts and to arrange for the deposit or withdrawal of corporate funds has been delegated by resolution of the Board of Directors to specified personnel. All withdrawals from approved accounts shall be only by corporate check or by interbank transfer to other Company accounts, and no check may be issued to “cash” or to a numbered bank account unless other information sufficient to identify the person receiving the benefit or the purpose of the payment appears on the face of the check. No check may be issued in a transaction that involves the direct or indirect setting aside or earmarking of funds, accounts or monies which, regardless of purpose, are not clearly recorded and accessible to and understandable by the Company’s auditors.

CONFLICTS OF INTEREST

      The Company expects the undivided loyalty of its Covered Persons in the conduct of Company business. It is important that Covered Persons be free from any financial interests or other relationships that might conflict with the best interests of the Company. Accordingly, each Covered Person shall avoid any investment or other interest in another business that would conflict with the proper performance of their duties or responsibilities for the Company or that might interfere with their independence of judgment with respect to transactions between the Company and such other business.

      While it is impossible to list all the situations in which possible conflicts might arise, examples are as follows:

      If a Covered Person finds that he or she has, or is considering the assumption of, a financial interest or outside relationship that might involve a conflict of interest, or if he or she is in doubt as to the proper application of this policy, he or she should promptly make all the facts known to the Company’s Policies Officer and refrain from any exercise of responsibility in any manner which might reasonably be considered to be affected by such adverse interest. Craftmade’s Policies Officer shall submit the arrangement to the Audit Committee, and the final decision as to the existence of a conflict of interest shall be made by the Audit Committee after consultation with the Company’s Policies Officer.

INTELLECTUAL PROPERTY

      All Covered Persons shall observe and use their best efforts to protect any patent, trademark, copyright, trade secret, proprietary technology, confidential information or any other intellectual property right of the Company. In addition, Covered Persons shall not knowingly infringe or otherwise violate any valid intellectual property right of any third party in connection with the performance of their duties for the Company.

ANNUAL REPORT

      Certain officers and key employees of the Company will be required annually to submit Compliance Reports to the Company’s Policies Officer, who will then submit an overall Compliance Report on behalf of the Company to the Audit Committee of Craftmade’s Board of Directors. The Company reserves the right to request (i) any Covered Person to submit a Compliance Report at any time or as frequently as it may deem advisable and (ii) any further relevant information from any Covered Person the Company deems necessary.

REPORTING

      A Covered Person should immediately report any violation of the standards to his supervisor and the Policies Officer. Any supervisor who is informed by a Covered Person of a violation of the guidelines should report the infraction to the Company’s Policies Officer, who will also report to the Audit Committee. If a Covered Person’s supervisor is involved in the policy violation, the Covered Person should report the breach to the Company’s CEO.

      Prohibited actions by the CEO and senior financial officers must be reported to the Chairman of the Audit Committee of the Board of Directors. Suspected violations may be reported on a confidential basis by detailing the facts related to the suspected misconduct or violation either in a letter mailed to:

      Suspected violations or concerns regarding questionable accounting or audit matters may also be reported by officers and employees directly to the Audit Committee on a confidential basis through the address or phone number above. Please indicate in your message or in the envelope that the matter is to be addressed by and reviewed solely by the Audit Committee.

      The Company will not retaliate against any Covered Person for reporting another person’s suspected violation of this Policy, for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any federal offense, or for providing information on actions such officer or employee reasonably believes to be violations of securities laws, rules of the Securities and Exchange Commission, or other federal laws relating to fraud against stockholders.

COMPLIANCE AND DISCIPLINARY ACTION

      Any officer or employee who violates any of the provisions of this Policy, or knowingly permits an officer or employee under his or her supervision to do so, may be subject to disciplinary action, up to and including termination of employment. Any officer or employee having knowledge of, but failing to report, any violation of this Policy may be subject to similar disciplinary action.

      Any suspected violation of this Policy will be reviewed by the Policies Officer and, if appropriate, law enforcement authorities will be notified.

      The Company will support criminal prosecution of Covered Persons involved in any violation of this Policy, which constitutes criminal conduct, regardless of restitution. This support will include, but not be

limited to, cooperation with respect to the availability of witnesses, documents and any necessary financial expenditures. In addition, when appropriate, the Company may institute civil proceedings against violators of this Policy.

WAIVER

      Any waiver of this Policy with respect to a director or executive officer may only be granted by the Board of Directors. All waivers granted by the Board of Directors shall be promptly reported to the entire Board and be publicly disclosed as required by the rules and regulations of the SEC and NASDAQ.

      Please review this Business Ethics Policy carefully. Once you have done so, please acknowledge you have read and understand it by signing your name on the attached acknowledgment page.

ACKNOWLEDGMENT PAGE

OF BUSINESS ETHICS POLICY

      I have received a copy of the Business Ethics Policy of Craftmade International, Inc., dated                    ,                     ,                     , and will comply with the provisions included therein.

      I have delivered to the Employer whose name appears above a copy of the Business Ethics Policy of Craftmade International, Inc., dated                    ,                     ,                     .