Superstar Platforms, Inc. (OTCID: SPST) (“Superstar,” “we,” “us,” “our” or the “Company”), a technology-focused holding company building and acquiring businesses across financial technology, automotive and technology-enabled commerce, today announced that it has entered into an agreement to acquire TitlePal, Inc. (“TitlePal”) in an all-stock transaction.

TitlePal is a financial technology company that has developed a web- and mobile-based platform designed to modernize the traditional vehicle title lending and title pawn transaction by moving much of the customer experience from a physical storefront to a consumer’s Smartphone or computer.

The acquisition is expected to expand Superstar’s financial technology platform while providing the Company with exposure to an established consumer finance category that historically has operated primarily through brick-and-mortar locations.

Transforming a Traditionally Storefront-Based Industry

For decades, the vehicle title lending industry has largely operated through physical storefronts. A consumer seeking a title loan or title pawn typically travels to a lending location, presents a vehicle and clear title, completes an application, allows the lender to evaluate the vehicle and collateral, executes the required transaction documents and receives funds while retaining possession and use of the vehicle. TitlePal was developed around the premise that technology can significantly change that process.

Rather than requiring the customer to begin the transaction inside a traditional title lending location, TitlePal is designed to allow eligible consumers with qualifying vehicle titles to initiate and complete the process remotely through a computer or mobile device at their convenience.

The TitlePal platform incorporates digital applications, identity verification, vehicle and title verification, underwriting, third-party data integrations, document processing and electronic funding into a streamlined technology platform. TitlePal’s technology utilizes smartphone capabilities and third-party verification resources to facilitate vehicle inspection and transaction verification without requiring the consumer to enter a traditional storefront. TitlePal provides consumers with a complete digital environment encompassing the application, inspection, approval and funding process, designed to improve convenience and the overall customer experience.

“We believe TitlePal represents the type of technology driven transformation that Superstar Platforms was built to pursue,” said Michael Farr, Chief Executive Officer. “The underlying vehicle title lending business has existed for decades, but the customer experience continues to rely heavily on physical locations. Consumers today bank from their phones, purchase automobiles from their phones, buy groceries from their phones and manage much of their financial lives from their phones. We believe the title lending customer should have the same opportunity.”

The Digital Transformation of Title Lending

TitlePal’s strategy is not based on changing the underlying collateral based nature of the product. Instead, the Company’s strategy is focused on changing how the loan is originated. Today, most title lending transactions continue to depend heavily upon face-to-face interaction and physical locations. TitlePal moves loan origination, verification, underwriting and funding into a digital environment.

Traditional title lenders have historically required substantial physical infrastructure to originate transactions across multiple geographic markets. A technology based model is designed to allow TitlePal to acquire and serve customers digitally while centralizing significant portions of underwriting, verification, servicing and collections. This provides an opportunity to scale receivables and customer relationships without requiring a corresponding expansion of physical storefront infrastructure.

A Large Existing Industry Positioned for Technology Adoption

TitlePal is entering an established consumer finance market rather than attempting to create a new lending category. More than 2 million Americans used auto title loans annually, with more than 8,000 title lending storefronts operating across 25 states. Consumers pay almost $4 billion annually in title loan fees, with an average loan size of approximately $1,000. (PEW Report)

The historical economics of the industry also demonstrate why the market is positioned for digital transformation. Pew reported that the largest title lender it analyzed historically spent approximately 66% of revenue on overhead, compared with approximately 18% on credit losses. TitlePal believes a technology driven model can reduce dependence on the extensive physical infrastructure traditionally required to originate title loans by centralizing underwriting, verification, servicing and collections while acquiring and serving customers digitally.

For TitlePal, the opportunity is therefore not dependent upon creating consumer demand for a new financial product. The opportunity is to capture a portion of an already established lending market by providing consumers with a technology enabled alternative to the traditional storefront experience.

TitlePal is already a revenue generating business with interest income over the last 2 years of almost $700,000 with the potential to expand materially as the Company gains access to additional lending capital and enters additional markets.

A State-by-State Expansion Strategy

Vehicle title lending and title pawn transactions are governed by state-specific laws and regulations. TitlePal therefore expects its geographic expansion to occur on a state-by-state basis based upon applicable lending and pawn laws, licensing requirements and the technological infrastructure available within each jurisdiction. TitlePal’s expansion strategy places particular emphasis on states where electronic title and lien-processing capabilities can support a digital transaction.

Strategic Fit Within Superstar Platforms

The acquisition of TitlePal is expected to become an important component of Superstar Platforms’ broader strategy of acquiring and developing businesses operating at the intersection of technology, financial services and traditional industries undergoing digital transformation.

TitlePal will complement Superstar’s existing portfolio, including PawnTrust, Superstar’s technology-enabled marketplace developed specifically for the pawn industry.

While PawnTrust is designed to expand the digital reach of independent pawn retailers and their inventory, TitlePal is designed to address another segment of the collateral-based financial services market by digitizing the customer acquisition and lending experience. The two platforms reflect a common Superstar investment thesis: Large, established and fragmented industries can create significant opportunities when technology is applied to longstanding business models.

“Superstar Platforms is being built around businesses where technology can change the economics and customer experience of an established industry,” Farr said. “TitlePal fits directly into that strategy. We are acquiring a revenue-generating technology platform, operating experience and a business model that can be expanded over time as capital, licensing and market conditions permit.”

Transaction

Superstar Platforms has agreed to acquire TitlePal in an all-stock transaction. The transaction is expected to be structured with provisions designed to manage the timing and extent of potential dilution to Superstar’s existing common shareholders.

The acquisition remains subject to completion of definitive documentation, customary closing conditions and any corporate, regulatory or other approvals that may be applicable.

The Company expects to provide additional information regarding the transaction and its terms through its appropriate public disclosures following completion of definitive documentation.