Yield to Date ending September 30, 2021 Financial Report

December 7, 2021

Dear Equitech Shareholders,

Welcome to a new era!

I am pleased to report that during the third quarter, Equitech took steps to drastically change the company's raison d'être, its operations, and the markets it serves. The company continues its fast transformation to become an Opto-electronic Solutions Provider for In-line Process Management.  You are reading Equitech's first consolidated report as it now includes the results of our subsidiary CompSOL.

Summary

Equitech had a very good third quarter in all counts.  We increased our sales, added and trained a reseller for the entire European continent and Taiwan, established an OEM Sales Program, were mentioned in the press and social media several times, re-started manufacturing under a new roof, completed several OEM projects, sold several UV-Vis systems and several fiber-optic probes, settled a licensing agreement dispute, obtained approval from the shareholders for the deployment of an Equity Incentive Plan, met the SEC Rule 15c2-11 compliance deadline, and have begun preliminary steps to submit a registration statement with the Securities Exchange Commission (SEC) with the hope of becoming a fully reporting company during 2022.

I. Sales & Marketing

Sales increased 113% compared to Q3-2020 and our YTD is 72% higher than 2020.  These numbers include revenues from our subsidiary CompSOL.  Nonetheless, the numbers are very encouraging for many reasons.  During the quarter, we had several successful trials that resulted in the sale of instruments, probes, and services in the USA and abroad.

COGS increased 14.8% compared to Q3-2020 but our YTD is 14.4% lower than 2020. COGS will likely diminish even more during the next quarters as CompSOL gains experience with the production of UV-Vis product line.

Expenses increased 1,291% compared to Q3-2020 and our YTD is 711.6% higher than 2020.  The numbers can be explained as follows: Equitech assumed CompSOL’s expenses close to $30K. An additional $136K was accrued for stock options that the employees will receive at the end of the year; when they do, the number will be adjusted down accordingly. Finally, about $160K were spent in accounting and legal fees as the Company chose to remain listed in the OTC and therefore comply with the new SEC rule. This is not a recurring expense.

We signed an exclusive agreement with Aguilar & Pineda (Barcelona, Spain) as our sole representatives for Europe.  As we reported before, A&P has over 100 years’ experience in process equipment.  A&P is actively promoting our products and has already exhibited Equitech's products at Expoquimia, a chemical trade show and at ASEFAPI, the Spanish Association for Producers of Inks and Paints.

PlasticsNews ran a full-page article on Equitech and its UV-Vis business.  This article was uploaded to LinkedIn where it has received (as of today) over 1,400 views.

II. Development & Manufacturing

Original Design Manufacturing (ODM) Business Sector

CompSOL, our subsidiary responsible for development & manufacturing, is in discussion with 5 major companies to produce new opto-electronic designs and/or to review current designs.  Some of the work is proprietary and cannot be discussed publicly, but a summary follows:

We completed customer 1 desktop application and deployed and ran it at its facility in South Carolina. The system developed automatically tests, generates certificates, and saves test data for 3 phase power conversion units used in military aircrafts.

We supplied customer 2 with humidity and temperature control systems for attics and crawlspaces and continue providing them with routine updates.  The company was able to provide UL certification support.

We developed a 360-degree remote monitoring system for customer 3 to integrate with a newly designed USB hub/audio codec module. In addition, we developed a tester to enable the customer to test units in-house.

We are currently discussing with customer 4, the producer of a smart athlete training workout system, redesigning a winding module using an optical sensor to accurately detect distance traveled.

Finally, we are discussing with customer 5, the producer of a power factor correction and monitoring system, moving test systems, and productions over to our facility.

UV-Vis Business Sector

After transferring the manufacturing production, inventory, BOM, and manufacturing practices of the UV-Vis business to CompSOL, Equitech reinitiated shipments of products nationally and internationally.

We assembled several ATR, RPMP and Transmission Cells probes for multiple customers.  In addition, the company ran several laboratory samples for potential customers. Laboratory samples analysis is normally the first step in the generation of a quotation.

Because of the chip shortage issue caused by the Covid-19 pandemic, we purchased a different temperature controller for our systems.  We are in the process of adjusting our operating software so it can interact with this new controller.

Gen V

Equitech began work to advance its UV-Vis technology.  We call the new instrument (to be launched to the market in 2022), Generation V.

On the hardware front, we have identified the high-level components to be used in the next generation instrument and beginning to work on the development of components and subassemblies. On the software front, we have set up a platform for EquiColor 2.0 and we are currently working on developing the first stages of the backbone database, have multiple graphical user interface (GUI) views in place, and finalize the communication flow between the hardware and the software.

III. Stabilization of Company's Finances

1. Dispute Settlement

Back in 2010, Equitech signed a Licensing Agreement with ColVisTec AG, a German company, to advance the production of Equitech's technology and inject funds into the company. 

Under the terms of the agreement, ColVisTec was limited to manufacture and commercialize instruments & probes only in Europe and the Middle East. In addition, the two companies signed a Mutual Supply Agreement on June 23^rd, 2014, whereby, Equitech purchased 100% of the instruments and probes from ColVisTec.  Manufacturing of all products began to take place in Berlin, Germany. 

Looking back, Equitech went from being an innovator, inventor, and developer to becoming a USA distributor of its own technology at prices unsustainable for the world market.

On September 1, 2021, we were able to cancel this Licensing Agreement with ColVisTec and mutually released each other from any obligations.  In addition, the companies divested their interests in each other.

With the licensing agreement cancellation, Equitech eliminated a sour business relationship that was slowing down the advancement of the company.  Furthermore, Equitech regained access to the European & Middle East territories, important markets for the new products that we are developing. 

As the book Crossing the Chasm teaches: "Most startups fail to recognize that their marketing strategies that worked well to attract the early adopters aren't suitable to attract the early majority".  One of these strategies is the creation of a competitor.  Without a competitor, the adoption of a new and revolutionary technology in manufacturing practices is a very slow process. Thus, a positive way to look at our relationship with ColVisTec during the past 10 years is exactly that: we created a competitor that is helping validate a breakthrough technology.

2. Compliance with OTC and SEC Regulations

We met the requirements of SEC Rule 15c2-11 established by the Securities Exchange Commission (SEC) and were able to avoid being delisted. 

OTC

We still hold a 'Yield' sign that should go away once we meet the final requirements during the first quarter of 2022.  What's missing?  The OTC asks that we file the 3rd quarter report (this one) and 2021 annual report.  Finally, our securities attorney needs to provide the OTC with an Opinion Letter after which we should become a 'Current Information Company'.

SEC

Equitech was born (1995) from the merger of a public (shell) company (NuStar) and a private company (Equitech). Because of this history, many of our shareholders have restricted securities. Restricted securities are previously issued securities held by security holders that are not freely tradable. For the great majority of shareholders, we believe that you can retain an outside Counsel/Securities Attorney who can provide you with an opinion letter allowing your shares to be transferred under an exemption from registration. Once the company fully registers with the SEC (our intention), we anticipate that most brokerage firms will accept our shares into their platform. The registration process will require two years of audited financial statements (2020 and 2021).  After we have those, we intend to file a registration statement with the SEC.  While we cannot provide certainty that the registration statement will be declared effective, we believe that it will and estimate that the process will take approximately 90-120 days from filing.

If you have questions regarding OTC/SEC, please send Anh Nguyen an email.

I am very excited about Equitech, the work we are doing, and our future!

Jaime 

Jaime A. Gómez, Ph.D.

President & CEO