Offsetting Penalties?

[nelson_28602]

We had this play last night at the JV game and I wanted your thoughts. 4Th and 2 on A's 38. A decides to go for the 1st down instead of punting. A comes up to the line of scrimmage and is set. B anticipates the snap and encroaches. The head lines man then throws his flag and calls failure to wear required equipment on A (our QB's mouth piece was dangling from his facemask). The officials rule that the penalties offset and replay the down. My question is, The failure to wear required equipment rule says during the down, and since the ball never became live, this infraction should not have been called, thus A would have a first down. Your thoughts...