# CANDLEWOOD SECURITIES, LLC X-17A-5 (2021-04-09) — Broker-dealer annual report - Company: CANDLEWOOD SECURITIES, LLC - Form: X-17A-5 - Filed: 2021-04-09 - Period: 2019-12-31 - Accession: 0001222416-21-000004 - CIK: 1222416 - File #: 8-65845 - Material weakness: No - Auditor: Marcum LLP - Auditor location: Tampa, FL - Contact: Steve Latkovic - Phone: 2164726642 - Signed by: Steve Latkovic (CEO) Original filing: https://www.sec.gov/Archives/edgar/data/1222416/000122241621000004/2019cwdaudit1.pdf --- {0}------------------------------------------------ . FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2019 {1}------------------------------------------------ UNITEDSTATES SECURITIES ANDEXCHANGE COMMISSION Washington, D.C. 20549 OMB APPROVAL OMB Number: 3235-0123 Expires: August 31, 2020 Estimated average burden hours per response .. . . . . . . 12.00 8- SEC FILE NUMBER # ANNUAL AUDITED REPORT FORM X-17A-5 PART III FACING PAGE Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder | REPORT FOR THE PERIOD BEGINNING 01/01/2019 | | AND ENDING 12/31/2019 | | | |-------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------|-----------------------|--------------------------------|--| | MM/DD/YY | | | MM/DD/YY | | | | A. REGISTRANT IDENTIFICATION | | | | | NAME OF BROKER-DEALER: Candlewood Securities LLC | | | OFFICIAL USE ONLY | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | FIRM I.D. NO. | | | 600 Superior Ave. E., Suite 1800 | | | | | | | (No. and Street) | | | | | Cleveland | OH | 44114 | | | | (City) | (State) | (Zip Code) | | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
Stephen J. Latkovic 216-472-6642 | | | | | | | | | (Area Code - Telephone Number) | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | Marcum LLP | | | | | | | (Name - if individual, state last, first, middle name) | | | | | 6685 Beta Drive | | он | | | | | Mayfield Heights | | 44143 | | | (Address) | (City) | (State) | (Zip Code) | | | CHECK ONE: | | | | | | Certified Public Accountant | | | | | | Public Accountant | | | | | | | Accountant not resident in United States or any of its possessions. | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | | | | | | | | | Claims for exemption from the reguirement that the annual report be covered by the opinion of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See Section 240.17a-5(c)(2) > Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. SEC 1410 (11-05) == {2}------------------------------------------------ #### OATH OR AFFIRMATION | Stephen J. Latkovic | | , swear (or affirm) that, to the best of | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---------------------------------------------------------------------------------------------------------------------------------| | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
Candlewood Securities LLC | | . as | | of December 31 | | are the court of the and correct. I further swear (or affirm) that | | neither the company nor any partner, principal officer or director has any proprietary interest in any account
classified solely as that of a customer, except as follows: | | | | | | Signature | | CEO/COO | | | | | | Title | | This report ** contains (check all applicable boxes):
(a) Facing Page.
(b) Statement of Financial Condition.
(c) Statement of Income (Loss) or, if there is other comprehensive in the period(s) presented, a Statement
of Comprehensive Income (as defined in §210.1-02 of Regulation S-X).
(d) Statement of Changes in Financial Condition.
(e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital.
(f) Statement of Changes in Liabilities Subordinated to Claims of Creditors.
(g) Computation of Net Capital.
(h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3.
(i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3.
(i) A Reconciliation, including appropriate explanation of Net Capital Under Rule 15c3-1 and the
Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3.
(k) A Reconciliation between the audited Statements of Financial Condition with respect to methods of
consolidation.
(1) An Oath or Affirmation.
(m) A copy of the SIPC Supplemental Report. | | | | | | (n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. | | ** For conditions of confidential treatment of certain portions of this filing, see section 240.17a-5(e)(3). | | | {3}------------------------------------------------ #### **SECURITIES AND EXCHANGE COMMISSION** #### **Washington, D.C. 20549** #### **ANNUAL AUDIT REPORT** For the Period from January 1, 2019 to December 31, 2019 Candlewood Securities LLC **(Name of Respondent)** 600 Superior Ave., East, Ste. 1800 Cleveland, Ohio 44114 **(Address of Principal Executive Office)** Mr. Stephen Latkovic Candlewood Securities LLC 600 Superior Ave., East, Ste. 1800 Cleveland, Ohio 44114 (216) 472-6660 **(Name and address of person authorized to receive notices and communications from the Securities and Exchange Commission)** {4}------------------------------------------------ ## TABLE OF CONTENTS | | PAGE | |------------------------------------------------------------------------------------------------------------------------------------------------------|------| | REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 1 | | FINANCIAL STATEMENTS | | | Statement of Financial Condition | 3 | | Statement of Income | 4 | | Statement of Changes in Member's Equity | 5 | | Statement of Cash Flows | 6 | | Notes to Financial Statements | 7-9 | | SUPPLEMENTAL INFORMATION | | | Schedule I - Computation of Net Capital Pursuant to Rule 15c3-1 of the
Securities Exchange Act and Statement Pursuant to Rule 17a-5(d)(2)(iii) | 10 | | Schedule II – Computation for Determination of the Reserve Requirements
Under Rule 15c3-3 (Exception) | 12 | | Schedule III –Information Relating to the Possession or Control
Requirements Under Rule 15c3-3 (Exception) | 13 | | SUPPLEMENTAL REPORTS | | | Report of Independent Registered Public Accounting Firm Required by SEC
Rule 17a-5 for a Broker-Dealer Claiming an Exemption from SEC Rule 15c3-3 | 14 | | SEC Rule 15c3-3 Exemption Report | 15 | {5}------------------------------------------------ ![](_page_5_Picture_0.jpeg) # **5(32572),1'(3(1'(175(\*,67(5('38%/,&\$&&2817,1\*),50** ## 7RWKH0HPEHURI **&DQGOHZRRG6HFXULWLHV//&** ## *Opinion on the Financial Statements* :HKDYHDXGLWHGWKHDFFRPSDQ\LQJVWDWHPHQWRI ILQDQFLDOFRQGLWLRQRI&DQGOHZRRG6HFXULWLHV //& WKH³&RPSDQ\´ DV RI'HFHPEHU WKH UHODWHG VWDWHPHQWV RILQFRPHFKDQJHVLQ PHPEHU¶V HTXLW\ DQG FDVK IORZV IRU WKH \HDU WKHQ HQGHG DQG WKH UHODWHG QRWHV FROOHFWLYHO\ UHIHUUHGWRDVWKHILQDQFLDOVWDWHPHQWV ,QRXURSLQLRQWKHILQDQFLDOVWDWHPHQWVSUHVHQWIDLUO\LQ DOOPDWHULDO UHVSHFWVWKH ILQDQFLDO SRVLWLRQ RIWKH&RPSDQ\ DV RI'HFHPEHU DQGWKH UHVXOWVRILWVRSHUDWLRQVDQGLWVFDVKIORZVIRUWKH\HDUWKHQHQGHGLQFRQIRUPLW\ZLWKDFFRXQWLQJ SULQFLSOHVJHQHUDOO\DFFHSWHGLQWKH8QLWHG6WDWHVRI\$PHULFD ## *Basis for Opinion* 7KHVH ILQDQFLDO VWDWHPHQWV DUH WKH UHVSRQVLELOLW\ RI WKH &RPSDQ\¶V PDQDJHPHQW 2XU UHVSRQVLELOLW\LVWRH[SUHVVDQRSLQLRQRQ WKH&RPSDQ\¶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{6}------------------------------------------------ # *Supplemental Information* 7KHLQIRUPDWLRQFRQWDLQHGLQ6FKHGXOHV,,,DQG,,, WKH³VXSSOHPHQWDOLQIRUPDWLRQ´ KDVEHHQ VXEMHFWHGWRDXGLWSURFHGXUHVSHUIRUPHGLQFRQMXQFWLRQZLWKWKHDXGLWRI WKH&RPSDQ\¶VILQDQFLDO VWDWHPHQWV7KH VXSSOHPHQWDOLQIRUPDWLRQLVWKH UHVSRQVLELOLW\RIWKH&RPSDQ\¶VPDQDJHPHQW 2XUDXGLWSURFHGXUHVLQFOXGHGGHWHUPLQLQJZKHWKHUWKHVXSSOHPHQWDOLQIRUPDWLRQUHFRQFLOHVWRWKH ILQDQFLDOVWDWHPHQWVRUWKHXQGHUO\LQJDFFRXQWLQJDQGRWKHUUHFRUGVDVDSSOLFDEOHDQGSHUIRUPLQJ SURFHGXUHVWRWHVWWKHFRPSOHWHQHVVDQGDFFXUDF\RIWKHLQIRUPDWLRQSUHVHQWHGLQWKHVXSSOHPHQWDO LQIRUPDWLRQ,QIRUPLQJRXURSLQLRQRQWKHVXSSOHPHQWDOLQIRUPDWLRQZHHYDOXDWHGZKHWKHUWKH VXSSOHPHQWDO LQIRUPDWLRQ LQFOXGLQJ LWV IRUP DQG FRQWHQW LV SUHVHQWHG LQ FRQIRUPLW\ ZLWK &)5§240.D ,Q RXU RSLQLRQWKH VXSSOHPHQWDOLQIRUPDWLRQLV IDLUO\ VWDWHGLQDOOPDWHULDO UHVSHFWVLQUHODWLRQWRWKHILQDQFLDOVWDWHPHQWVDVDZKROH :HKDYHVHUYHGDVWKH&RPSDQ\¶VDXGLWRUVLQFH 7DPSD)/ \$SULO {7}------------------------------------------------ Statement of Financial Condition December 31, 2019 #### **ASSETS** | Cash
Accounts receivable
Prepaid expenses | \$
30,689
1,721,576
111,755 | |-------------------------------------------------|--------------------------------------| | TOTAL ASSETS | \$ 1,864,020 | #### **LIABILITIES AND MEMBER'S EQUITY** | Accounts payable
Accrued commissions
Deferred revenue | \$
3,520
1,648,161
110,000 | |-------------------------------------------------------------|-------------------------------------| | TOTAL LIABILITIES | 1,761,681 | | MEMBER'S EQUITY | 102,339 | | TOTAL LIABILITIES AND MEMBER'S EQUITY | \$ 1,864,020 | {8}------------------------------------------------ Statement of Income For the Year Ended December 31, 2019 | REVENUE | \$3,633,653 | |-------------------------------------------------------------------------------------------------------------------|---------------------------------------------------| | OPERATING EXPENSES | | | Commission expense
Legal and professional fees
Regulatory expense
Occupancy and shared expenses
Other | \$3,360,815
27,952
24,391
5,280
3,354 | | TOTAL OPERATING EXPENSES | 3,421,792 | | NET INCOME | \$211,861 | *6HHDFFRPSDQ\LQJ1RWHVWR)LQDQFLDO6WDWHPHQWV* {9}------------------------------------------------ Statement of Changes in Member's Equity For the Year Ended December 31, 2019 | BALANCE, January 1, 2019 | \$
150,478 | |----------------------------|---------------| | Distributions | (260,000) | | Net Income | 211,861 | | BALANCE, December 31, 2019 | \$
102,339 | *6HHDFFRPSDQ\LQJ1RWHVWR)LQDQFLDO6WDWHPHQWV* {10}------------------------------------------------ #### Statement of Cash Flows For the Year Ended December 31, 2019 | CASH FLOWS FROM OPERATING ACTIVITIES | | |-----------------------------------------------------------------------------------|---------------| | Net income | \$
211,861 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | Change in assets and liabilities: | | | Increase in Accounts Receivable | (1,721,576) | | Increase in prepaid expenses | (99,112) | | Increase in accounts payable | 1,187 | | Increase in accrued commissions | 1,636,207 | | Increase in deferred revenue | 110,000 | | NET CASH PROVIDED BY OPERATING ACTIVITIES | 138,567 | | CASH FLOWS FROM FINANCING ACTIVITIES | | | Member's distributions | (260,000) | | NET CASH USED BY FINANCING ACTIVITIES | (260,000) | | NET DECREASE IN CASH | (121,433) | | CASH, beginning of year | 152,122 | | CASH, end of year | \$
30,689 | {11}------------------------------------------------ Notes to Financial Statements December 31, 2019 ## **NOTE A - Summary of significant accounting policies** #### *%XVLQHVVDFWLYLW\* Candlewood Securities LLC (the "Company") is a registered broker-dealer under the Securities Exchange Act of 1934. The Company provides general investment banking and advisory services to a wide array of clients, ranging from start-ups to publicly traded companies. Its broker-dealer services focus primarily on private placements for closely-held companies or institutional investment funds. The Company was formed on September 9, 2002, as an Ohio limited liability company; as such, its sole member possess limited personal liability for obligations of the Company. The Company will continue to exist perpetually unless terminated earlier by its sole member Candlewood Partners LLC. #### *%DVLVRIDFFRXQWLQJ* The financial statements of the Company have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. #### *,QFRPHWD[HV* The Company is a single member limited liability company. The Company is treated as a disregarded entity for federal and state income tax purposes. In lieu of paying taxes at the company level, the parent is taxed on the Company's taxable income. Therefore, no provision or liability for federal or state income taxes has been included in these financial statements. The Company follows the accounting guidance for uncertainty in income taxes using the provisions of Accounting Standards Codification 740, Income Taxes (ASC 740). Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. As of December 31, 2019 the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. It is the Company's policy to include any penalties and interest related to income taxes in its operating expenses, however, the Company currently has no penalties or interest related to income taxes. The earliest year that the Company is subject to examination is the year ended December 31, 2016. #### *8VHRIHVWLPDWHV* The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. #### *5HYHQXHUHFRJQLWLRQ* Revenues from contracts with customers is recognized following a five step model to (a) identify the contracts(s) with a customer, (b) identify the performance obligations in the contract, (c) determine transaction price, (d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when (or as) the entity satisfies the performance obligation. {12}------------------------------------------------ #### **NOTE B – Revenue from Contracts with Customers** #### *6LJQLILFDQW-XGJPHQWV* The recognition and measurement of revenue is based on the assessment of individual contract terms. There are no significant judgements required in calculating revenue. #### *&RVWVWR2EWDLQRU)XOILOOD&RQWUDFWZLWKD&XVWRPHU* The Company records as an asset certain costs incurred to obtain revenue contracts with its customers such as sales commissions paid to employees for obtaining new contracts with clients. These costs are expensed at the time the performance obligation has been satisfied. The Company did not have assets from costs to obtain contracts with customers at December 31, 2019. #### *&RPPLVVLRQ5HYHQXH* Commission revenue is earned based upon a percentage of funds raised. Revenues are recognized generally when performance under the applicable contract is completed, as defined by the successful placement of capital commitments. Retainer fees are deferred when offset against future commission payments. Deferred revenues from retainer fees at December 31, 2019 were \$110,000. #### *\$GPLQLVWUDWLYH)HH5HYHQXH* Administrative revenue is earned from the Company's registered representatives based upon a predetermined contractual amount. Revenues are recognized based on the period covered by each contractual amount, usually monthly. #### *'LVDJJUHJDWLRQRI5HYHQXH* Disaggregation of the Company's revenue by major sources for the year ended December 31, 2019 is as follows: | Commission | \$ 3,580,428 | |--------------------|--------------| | Administrative Fee | 53,225 | | | \$ 3,633,653 | #### **NOTE C – Net Capital Rule** The Company is typically required to maintain a minimum net capital balance (as defined) of \$5,000, pursuant to the SEC's Uniform Net Capital rule 15c3-1. At December 31, 2019 however, the minimum net capital balance required was \$117,445 because of a large payable generated at year end. The Company's net capital balance was (\$123,765) at December 31, 2019. The Company must also maintain a ratio of aggregate indebtedness (as defined) to net capital of not more than 15 to 1. The Company's ratio was -14.2 to 1 at December 31, 2019. The Company was in violation of the Uniform Net Capital rules through March 10, 2020 but infused \$75,000 of capital on March 11, 2020 to address such noncompliance. The Company discovered it was in violation of the Uniform Net Capital rules again on April 9, 2010 and immediately infused \$50,000 of capital to address the noncompliance. #### **NOTE D - Related party** The Company is party to a services agreement with Candlewood Partners LLC., its affiliate, whereby the Company pays \$440 per month for rent and utilities incurred by Candlewood Partners on behalf of the Company. Expenses of \$5,280 were reported by the Company related to this agreement for the year ended December 31, 2019. #### **NOTE E – Contingencies** In the normal course of business, the Company is subject to routine examinations by FINRA and the SEC and subject to penalties, fines and capital assessments resulting from those examinations. The Company is presently not under {13}------------------------------------------------ examination by the SEC. The Company is currently under review by FINRA for two matters: i) its net capital deficiency, and ii) the placement of securities for a client in January 2019. The Company has responded to FINRA and waiting resolution to these matters. #### **NOTE F – Subsequent Events** In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic is spreading throughout the United States and world. As of the date of the financial statements were available to be issued, there has been no material impact to the Company's operations or financial position as a result of the pandemic, though there is considerable uncertainty around the pandemic's duration. As a result, the ultimate impact on the Company's operations and financial position can not be determined. {14}------------------------------------------------ # CANDLEWOOD SECURITIES, LLC SUPPLEMENTAL INFORMATION As of December 31, 2019 ## **SCHEDULE I - Computation of Net Capital Under Rule 15c3-1 of the Securities and Exchange Commission** ## **Computation of Net Capital** | Total member's equity from statement of financial condition | \$
102,339 | |-------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------| | Deductions and/or charges:
Net Non-Allowable Receivables
Prepaid expenses
Fidelity bond deficit coverage
Total non-allowable assets | (73,415)
(111,755)
(40,934)
(226,104) | | Net Capital | \$
(123,765) | | Aggregate Indebtedness
Total liabilities from statement of financial condition
Percentage of aggregate indebtedness to net capital | \$ 1,761,681
-14.23 to 1.0 | | Computation of Basic Net Capital Requirement | | | Minimum net capital required (6 2/3% of total aggregate indebtedness)
Minimum dollar required net capital | \$
117,445
\$
117,445 | | Net capital requirement | \$
117,445 | | Net Capital Deficiency | \$ (241,210) | {15}------------------------------------------------ #### **Statement Pursuant to Rule 17a-5(d)(2)(iii)** Reconciliation with Company's computation of net capital as presented in Part IIA of Form X-17A-5 as of December 31, 2019 | Net Capital as reported | \$56,624 | |---------------------------------------------------------------------------------------------------------------------------|-------------| | Post-closing adjustments to accrue commission revenues, net | 64,388 | | Audit Adjustments: | | | Reverse 2020 revenue recorded in 2019, net of commission expense | (12,303) | | Accrue 2019 expenses not recorded | (30,871) | | Nonallowable assets: | | | Record prepaid commission expense | (100,650) | | Nonallowable commission receivable amount | (60,019) | | Fidelity bond deficit coverage | (40,934) | | Net Capital as reported above | (\$123,765) | | Reconciliation with Company's aggregated indebtedness as presented in
Part IIA of Form X-17A-5 as of December 31, 2019 | | | Aggregate indebtedness as reported | \$1,207,940 | | Adjust accrued commissions based on adjusted revenues | 443,741 | | Defer revenues related to retainer fees | 110,000 | | Aggregate indebtedness as reported above | \$1,761,681 | {16}------------------------------------------------ ## **SCHEDULE II - Computation For Determination of the Reserve Requirements Under Rule 15c3-3 (Exception)** Candlewood Securities, LLC is exempt from Rule 15c3-3 under the provision of Rule 15c3-3(k)(2)(ii). {17}------------------------------------------------ ## **SCHEDULE III – Information Relating to the Possession or Control Requirements Under Rule 15c3-3 (Exception)** Candlewood Securities, LLC is exempt from Rule 15c3-3 under the provision of Rule 15c3-3(k)(2)(ii). {18}------------------------------------------------ ![](_page_18_Picture_0.jpeg) ## REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We have reviewed management's statements, included in the accompanying Exemption Report, in which (1) Candlewood Securities, LLC (the "Company") identified the following provisions of 17 C.F.R. § 15c3-3(k) under which the Company claimed an exemption from 17 C.F.R. § 240.15c3-3: (2)(i) (the "exemption provision") and (2) the Company stated that the Company met the identified exemption throughout the most recent fiscal year without exception. The Company's management is responsible for compliance with the exemption provision and its statements. Our review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence about the Company's compliance with the exemption provision. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion on management's statements. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to management's statements referred to above for them to be fairly stated, in all material respects, based on the provision set forth in paragraph (k)(2)(i) of Rule 15c3-3 under the Securities Exchange Act of 1934. I arcum LLP Tampa, FL April 13, 2020 ![](_page_18_Picture_7.jpeg) {19}------------------------------------------------ ![](_page_19_Picture_0.jpeg) **CLEVELAND NEW YORK** 600 Superior Ave. East 477 Madison Avenue Suite 1800 Suite 600 Cleveland, OH 44114 New York, NY 10022 216.472.6660 Phone 212.655.9310 Phone April 13, 2020 # **Candlewood Securities LLC** # **SEC RULE 15c3-3 EXEMPTION REPORT** To the best of its knowledge and belief, Candlewood Securities LLC states the following: Candlewood Securities LLC is exempt from SEC Rule 15c3-3 (the Customer Protection Rule) pursuant to exemptive paragraph 15c3-3(k)(2)(i). Candlewood Securities LLC has met the identified exemptive provision noted above throughout the most recent fiscal year of 2019 without exception. I, Stephen J. Latkovic, affirm that, to the best of my knowledge and belief, this Exemption Report is true and correct. Sincerely, Stephen J. Latkovic CEO/CCO Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.