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Review of XOCAI MXI Corp Healthy Chocolate

This is one of a few examples of Business Opportunity Watch Reviews which are available for the public to view on the public section of the website. The reason for making a small sample of the reviews freely available is to help potential customers decide if they want to subscribe, and also to communicate some matters of general interest arising in the case of some of the reviews. All the other reviews are available only to subscribers. A zero score or a low score means that in our opinion the business model or the investment model has flaws and/or that we have found inadequate evidence to back up claims about earnings, sales, profits etc. It doesn't mean this evidence does not exist and it doesn't mean that the opportunity is a scam and it doesn't mean that the promoters are unprofessional or dishonest. Questions arising are normally contained within the body of the review, and readers who are interested should contact the company with these questions and/or questions of their own.

XOCAI
MXI Corp
795 Trademark Dr.
Reno
NV 89521
USA
www.mxicorp.com

- Review
- Your feedback


Review:

Xocai "The Healthy Chocolate Revolution" is a range of products containing chocolate which is sold via a US multi-level marketing scheme by a US company called MXI Corp.

As readers of BOW will be aware, US multi-level marketing schemes are not legal in the UK because they don't comply with the UK Trading Schemes Regulations. To be legal, what needs to happen is for a separate contract to be drawn up under UK law for the UK distributors.

MXI Corp plans, however, to launch its Xocai multi-level marketing plan in the UK in January 2009, and they already have a number of excited UK recruits who have set up recruiting websites, such as:

• www.healthychocolateworld.co.uk

• www.mxi.myvoffice.com/kimandmel/

• www.successbychocolate.co.uk

• www.xocai.uk.com

• www.makechocolateyourbusiness.co.uk

• www.chocworld.co.uk

It's important to be aware, though, that Xocai has a number of difficult and expensive tasks to complete before either MXI Corp itself or its UK distributors are able to legally open for business in the UK.

UK law is different to US law as regards not only multi-level marketing schemes but also product labelling and product advertising claim. So MXI Corp needs not only to have separate contracts for its UK Xocai distributors but also it may be necessary for its products to be specially packaged for the UK with separate advertising brochures for the UK.

MXI Corp certainly made a good start in setting up a separate UK company (MXI Corp UK Limited), apparently under the auspices of one of only three firms of solicitors who specialise in this complex area, as listed on the website of the UK's Direct Selling Association at www.dsa.org.uk.

However, after setting the UK company up there is nothing to show that Xocai has made further use of the services of any UK lawyer ... or indeed any UK accountant, since the company's accounts are several months overdue for filing at Companies House.

The UK Xocai distributors whose websites are shown above are recruiting illegally: they are inviting people to pay $39 to join the US scheme in contravention of the requirements of the UK Trading Scheme Regulations.

It's quite clear that this is the case because the Terms and Conditions which are part of the UK sign-up form on these sites are for the US Xocai scheme and it says in Paragraph 9: "I understand that compensation from the Company is established for my Distributorship in the MXI Corp Compensation Plan, provided I maintain a Distributorship that operates in compliance with Company Rules & Regulations and Policies & Procedures, and the terms and conditions stated herein".

One of these Xocai UK sites has even set up a title to appear on the Google search results which claims that it is "XOCAI UK - The UK's Official Healthy Chocolate Website". Signs are, however, that it is merely a UK Xocai distributor's website since it is registered in the name of a UK individual.

All of these UK Xocai recruiting websites are a serious matter because it's a criminal offence to run a scheme which does not comply with the Trading Schemes Regulations.

However, let's put the legalities to one side for the moment, and look at the products sold through the Xocai MLM scheme. These are all based on chocolate, and comprise various products such as X Powerhouse Cookies, little chocolate squares called X Power Squares, chocolate sweets called Nuggets, a drink called Activ and bars - a "meal on the go" - called Protein Bars.

The Xocai products are marketed as being healthy e.g:

• Xocai Nuggets - "The Healthy Chocolate"

• Xocai Activ - "The Ultimate Active Lifestyle Antioxidant Beverage"

• Xocai Powerhouse Cookies - "The Healthy Snack"

• Xocai X Power Squares - "The Ultimate Antioxidant Treat"

• Xocai Omega Bar - "The Essence of Health"

It seems paradoxical to say that chocolate is healthy because it contains high fat and sugar, with resulting high calories. For instance, the Xocai Omega Squares are 33% fat and 24% sugar, while the Power Squares are 33% fat and 39% sugar.

The healthy angle comes from the high antioxidant properties of cocoa beans.

It is, however, surprising that MXI Corp does not use organic ingredients.

Even more surprising is that one of the Xocai products - the Protein Bars - contain sucralose. Sucralose is not natural: it's chemically produced and each molecule of sucralose contains three atoms of chlorine. Moreover, it's never been thoroughly tested: there has never been a long-term human study. The tests which have been carried out on sucralose have been short-term and they were all conducted by the manufacturer - hardly unbiased. Most of these tests were carried out on rabbits, guinea pigs, dogs and rats and reading some of them makes you a bit queasy .

If you want to find out more about sucralose - whose trade name is Splenda or SucraPlus - then visit www.truthaboutsplenda.com. This is a special site set up by the Sugar Association in the USA, which represents sugar beet and sugar cane farmers across America.

Chlorine is used as a pesticide, but the makers claim that this isn't a problem because Splenda simply passes through the body. However, in their 1998 deliberations on whether to permit sucralose as a food additive, the Food and Drugs Administration in the US stated that, "The available pharmacokinetics data in the petition do not allow the agency to draw definitive conclusions regarding bioaccumulation of sucralose and its metabolites" and they noted that "11 to 27 percent of the administered dose is absorbed".

One company that wouldn't dream of using sucralose is the Queen's chocolatier, Prestat. In October 2007 they produced a new range called Choxi, with a gentle processing technique to preserve more of the antioxidants found in the cocoa bean. They sell an Organic Dark Chocolate Bar of 80g for £3.60. Let's look at how this compares to the Xocai products.

Well, for a start it is organic, which the Xocai products are not. As for its level of antioxidants, Choxi scores 460 per gram on the ORAC (oxygen radical absorbance capacity) scale, whereas Xocai's Omega Squares have just 268, Nuggets have just 260 and only Power Squares score better than Choxi with 597 per gram.

As for the price, the Xocai Power Squares (which weigh 6g) apparently retail for 1$ each. Using an approximate exchange rate of two dollars to the pound, that means Power Squares cost about 8.3p per gram, which is nearly double the Choxi price at 4.5p per gram.

Choxi is available from selected Tesco stores.

Perhaps part of the reason for Xocai's higher price is the commissions it has to pay out to reward its distributors for their sales: commissions are paid through thirteen generations of recruits and the "Executive Generation Bonus" can total up to 50% of the sales.

Climbing up the Xocai thirteen step ladder will be difficult at the start because Xocai operates a binary plan, which means that to receive your full entitlement to commissions you need to develop two equal "legs" of recruits in your team. With most network marketing companies the typical member only manages to recruit two or three people, so that you'll be lucky if your two "legs" develop evenly.

And to preserve your entitlement to commissions, you have to buy a case of chocolate from MXI Corp each month for $110. Presumably, the idea is that you will be able to make a profit on this with retail sales. It seems doubtful that this will happen, though. What Xocai recruit is going to spend time trying to make individual sales of such a small-ticket item as bars of chocolate? This is particularly so when it is clear that the road to wealth with Xocai is recruiting.

Probably, most Xocai chocolate will be eaten by Xocai members.

The next item I researched on Xocai was the background of its management team.

There are three people in the MXI Corp management team - Jeanette Brooks who is the Founder and President, her son Andrew N. Brooks who is the Founder and Executive Vice President Sales and Marketing and her brother Kurtis D. Nielson who is the Vice President Information Technology.

The Xocai product brochures say that, "Before MXI Corp, they founded Pure De-lite Products Inc., which was recognized as one of the leading distributors of low-carb, sugar-free products in the United States. Pure De-lite chocolates have achieved top honours and accolades from companies such as the American Culinary Institute, CNN and Health & Fitness as "The best Low-Carb Sugar-Free Chocolates"

It seemed odd that I could only find a couple of references to Pure De-lite products on the internet, and both of those were on websites where the page for the product said that they were no longer available. What could have happened to Pure De-lite?

The Pure De-lite product range was marketed by Pure De-lite Inc of Utah. On 25th April 2003 the company received a warning letter from the Food and Drug Administration stating that the label on their Pure De-lite Chocolate Bar was misbranded because it claimed "LOWCARB" and "ONLY 1.1 CARBS!". These claims were incorrect because the carbohydate maltitol contained in the bar had not been taken account. Furthermore, the label bore the incorrect claim "SUGAR FREE!" when in fact it contained sugar alcohol.

The FDA's letter asked the company to reply to them within 15 working days to tell them the specific steps they had taken or planned to take to correct the violations, together with copies of the revised labels. No response to this warning letter is recorded on the FDA website. The company experienced problems with creditors and went into receivership.

Further research revealed that this was the third time that a Jeanette Brooks company had bitten the dust. The first was Yurika Foods, also an MLM company marketing health foods, this time in Michigan, which filed for bankruptcy in 1985. The second was Phoenix International Corporation, again an MLM company marketing health foods - this time based in Nevada.

Phoenix International, too, had come to the attention of the FDA. In their Enforcement Report for 20th February 1991 the FDA demanded the recall of 1,311,559 cases of Phoenix Cookies on the grounds that the "Products made unsubstantiated drug claims and their sugar content is well in excess of label claim". The company declined over the next few years and then disappeared.

The problems with Jeanette Brooks' previous companies mostly arose through incorrect labelling. There is some evidence that she seems to have learnt from these mistakes because one of the MXI products - Xocai Power Sqares - is certified by an independent testing centre, Brunswick Lab. It's a shame that none of the other Xocai products have been certified.

Problems other than labelling are looming, though, which need to be sorted so as not to cause trouble when MXI launches in the UK. One is the Xocai distributors' websites, a number of which contain false and misleading claims.

Most MLM companies wisely insist that their distributors all use the same authorised website which the company provides to them. This prevents the problem which is otherwise bound to arise of distributors getting carried away by their enthusiasm into making exaggerated and false claims on websites they have designed for themselves (or on the version provided to them by their upline). This is precisely the problem which MXI has.

Every MXI distributor seems to have their own different web site and some examples of the false and misleading claims they contain are as follows (remember that Xocai Omega Squares are 33% fat and 24% sugar, while the Power Squares are 33% fat and 39% sugar):

• "May aid in weight loss as an appetite suppressant" www.healthychocolateworld.co.uk

• "A healthy alternative for children that may help to keep their weight in check" www.healthychocolateworld.co.uk

• "Products are low-carb and low in sugar - ideal for diabetics!" www.healthychocolateworld.co.uk

• "Xocai products deliver the full anitoxidant capacity of dark chocolate without the fat, wax, fillers, preservatives and high sugar content normally associated with chocolate." www.mxi.myvoffice.com

• "May Help You Lose Weight ... Weight Loss - indulge in this treat - decrease your appetite - be HEALTHY! ... Diet with Xocai Healthy Chocolate!" www.livebychocolate.co.uk

• "By making Xocai Chocolate part of your daily routine you too can lose weight and enjoy good health. Imagine eating delicious chocolate three or four times per day and lose weight doing so!" www.livebychocolate.co.uk

• "This Healthy Chocolate can help you curb your appetite, provide great nutrition and best of all ... satisfy your sweet tooth! This should be permanent staple in your healthy dieting routine. Losing weight has never been so easy or tasted so good!" www.livebychocolate.co.uk

• "Xocai offers a healthy chocolate product that is low in fat and sugar whilst being very high in antioxidant content, so it will suit health conscious individuals as well as those suffering from diabetes." www.teamxocai.co.uk

• "HEALTHY CHOCOLATE IS NOT AVAILABLE IN STORES!" www.mychocolateoffice.com

And the Xocai UK distributor's website at www.mychocolateoffice.com contains a ridiculous picture comparing a pile of fresh fruit and vegetables to 3 Xocai Power Squares with the claim that the fresh fruit and veg only contains the same amount of antioxidants - 10,746 ORAC - as the 3 Power Squares ... and costs nearly three times as much.

The truth is that one apple alone contains between 5,000 and 6,000 ORAC, depending on the variety, i.e. nearly as much as 2 Xocai Power Squares.

Even the website of Dr. Steve Warren, Medical Advisor for MXI Corp, at http://mydrchocolate.soundconcepts.com contains claims which are hard to swallow, as follows:

• Xocai is "Great for spastic colon, Crohn's, and ulcerative colitis. It helps a lot."

• "Cocoa contains bioactive chemicals which will help the bipolar disease. Healthy chocolate that contains omega 3 definitely helps bipolar patients."

• Xocai "is wonderful for fibromyalgia, and even the fibromyalgia association wanted information on it."

• Xocai "can help with specific health conditions, such as heart disease, diabetes, cancer, mental health, oral health, and obesity".

Dr. Warren has an interest in making such claims. Whether he is actually a participant in MXI's network marketing scheme itself is unknown, but he certainly holds the position of Medical Advisor to MXI Corp. Dr. Warren has also written a number of leaflets which he sells from his website and which recruits to the MXI scheme are advised to buy in bulk and distribute to their teams and prospective team members.

In the UK, if these leaflets are used as part of the selling or recruiting process, then they would be regarded as advertising material and - under the UK's advertising standards codes which are administered by the Advertising Standards Authority - only those claims which are supported by the results of carefully controlled clinical trials would be allowed. (Code 50.1 says "Medical and scientific claims made about beauty and health-related products should be backed by evidence, where appropriate consisting of trials conducted on people".)

So MXI's publicity material will need to be reviewed prior to the UK launch. MXI Corp has also promised to open a European manufacturing and distribution centre so that Xocai recruits don't have to pay for expensive postage from the US and have a long wait before their orders arrive.

MXI has therefore got a lot to do if it is to meet its promised January 2009 date for the UK launch.

Signs are not good that it will meet this deadline because it hasn't even been able to file the accounts for its new UK company on time - they were due on 5th May 2008 and they are still outstanding. Neither has the company so far been able to produce the UK contract for its UK Xocai distributors, and this despite the fact that their solicitors would have advised them that it was needed at the outset when the company was formed in July 2006.

Quite frequently, of course, producing a legally-compliant contract for UK distributors can be rather complicated if the existing US commission structure does not fit neatly into UK requirements because that would mean that the US scheme would need to be changed.

It is not unusual for US MLM companies to enter the UK illegally as MXI has done, with a slapdash pre-launch of their own existing US scheme instead of a legally-compliant UK one. The attractions of the slapdash pre-launch are not only that the company can gauge the UK market but also that they can get some money in from UK participants in advance to fund the costs of the UK launch.

The problem is that, as is so often the case, this means that all the risks are borne by the distributor. Will the company actually launch? And could the distributors be prosecuted in the meantime for running illegal businesses in the UK?

The slapdash route is unfair to distributors, and it bodes ill for the future.

Rating:

○○○○○○○○○○ (and see Updated Rating below)


BOW Notice: A zero score or a low score means that in our opinion the business model or the investment model has flaws and/or that we have found inadequate evidence to back up claims about earnings, sales, profits etc. It doesn't mean this evidence does not exist and it doesn't mean that the opportunity is a scam and it doesn't mean that the promoters are unprofessional or dishonest. Questions arising are normally contained within the body of the review, and readers who are interested should contact the company with these questions and/or questions of their own.

__________________________________

Feedback Received from a UK Xocai Distributor 17.12.08

Marian

Your review is out of date as packaging, uk pricing and distribution point have all been set up but you didn't think that was going to happen. there are also other websites available that tells different stories of the brooks history. http://www.mlmwatchdog.com/mlm_mxi_xocai_questions.html might be of interest.

Seems strange that you mention it is illegal to pay $39 to join a US scheme yet this happens on thousands of web sites, not just MXI perhaps that should be added as well.

I've joined, its looks good, everything they have promised in the build up to our launch in the UK has been done so we will wait and see what happens.

Perhaps an update on its progress should be carried out to complement your last report

Malcolm

Thanks for your feedback, Malcolm. Here are BOW's replies to your comments:

1. "Seems strange that you mention it is illegal to pay $39 to join a US scheme yet this happens on thousands of web sites, not just MXI perhaps that should be added as well."

I agree that there are a lot of non-UK multi-level schemes which invite recruits from all over the world, including the UK, without pointing out or even apparently being aware that such schemes are legal in the UK only if they comply with the Trading Schemes Regulations - which most of them don't.

Most of them don't last long, either.

2. UK Developments

XOCAI has a new, special website for its UK activities - www.mxicorp.eu and it's due to launch in the UK on 30th January 2009. It's good to see that this website contains a Distributor Agreement which complies with UK law.

The accounts have now been submitted for the UK company MXI Corp UK Limited for the period to 31st July 2007 (dormant).

Oddly, as shown in the UK Xocai Distributor Agreement, the promoter of the scheme in the UK is not the UK company. Instead, it's MXI Corp of Nevada.

3. Brooks history

I turn now to the information on the website at:

http://www.mlmwatchdog.com/mlm_mxi_xocai_questions.html

Here's what it says about Jeanette Brooks' three previous companies:

1.YURIKA

MLM Watchdog says:

"Yurika abruptly filed for bankruptcy in 1985"

This is correct and is in accordance with the above BOW report.

The MLM Watchdog site also says, "Jeanette's two senior partners, unknown to her, put the money into an offshore money scam (The Cayman Islands) and lost it".

2. PHOENIX

MLM Watchdog says:

"Phoenix International Marketing Corporation did not go bankrupt"

This is correct, and the BOW report above has been amended accordingly. In fact, after the issue of the FDA Enforcement Notice of 20 February 1991 for the nationwide recall of 1,311,559 cases of its Chocolate Chip Cookies, Oatmeal Raisin Cookies and Vanilla Cookies, Phoenix International simply declined and disappeared a couple of years later.

3. PUR DE-LITE

MLM Watchdog says:

"The WatchDog could NOT find this supposed FDA warning letter to Jeanette Brooks Pur De-Lite on the FDA website for 2004 - 2008. This proved to be a Fraud Statement on a Fraud website ... lied that the Pure De-lite Chocolate owned by Jeanette Brooks was hit by the FDA. Investigation proved that the entire low carb food industry got the same letter not just Pure De-Lite Products Inc, So the Negative information you see in other places ... unless it says that over 300+ companies got the same FDA letter which was a mass mailing by the FDA on carbohydrates and labelling. The Fraud statement about the FDA warning letter is just part of the unscrupulous fraudulent attack on MXI chocolate. Don't repeat it or the WatchDog may show up at your trial to testify that you posted fraudulent information on the web to damage MXI Xocai chocolate."

The FDA letter is in fact dated 25th April 2003. Headed "WARNING LETTER ONPLDS 01-03", it does not have any of the characteristics of a mass mailing because it relates specifically to the labelling of the Pure De-Lite Chocolate Bar and concludes that it is misbranded in view of the specific contents of this particular product.

The FDA letter was addressed to Mr. Kurtis D. Nielson as President of the company and asked him to "Please notify this office in writing, within 15 working days of receipt of this letter, of the specific steps you have taken or plan to take to correct the noted violations". No response has been posted on the FDA site.

Here's the link to the Warning Letter on the FDA website:

http://www.fda.gov/ICECI/EnforcementActions/WarningLetters
/2003/ucm147448.htm

__________________________________


UPDATED RATING - 20th January 2009

XOCAI
MXI Corp

In view of the fact that MXI Corp's operations in the UK are now legal since it has a UK Distributors Agreement which complies with UK law, I have changed its July 2008 rating of zero out of ten.

The new rating of Xocai is still, however, very low at two out of ten because of concerns about claims made for its products.

In addition to the wild claims found on some Xocai distributors' websites, MXI itself insists on saying that its products are low fat and low sugar when the truth is rather different. For example, Xocai Omega Squares are 33% fat and 24% sugar, while the Xocai Power Squares are 33% fat and 39% sugar. MXI Corp's Consultant Dr. Steve Warren said on Fox 59 News, in comparing Xocai chocolates to other chocolates, "we have just that ... you know ... more antioxidants without the caffeine, without the sugar, without the fat".

And on CBS3 News Dr. Steve Warren even said, " ... if you do this three times a day [eat an Xocai Nugget] you're getting your twelve servings of fruit and vegetables in one day"

In addition, XOCAI chocolate is expensive compared to other chocolate of the highest quality, as noted in the above report. With the decline in value of the pound (£1 is approx 1.4 USD at the time of writing) it's become more expensive. Xocai Power Squares of 6 gram (not organic) which retail at 1 USD each are now nearly three times as expensive per gram and about twice as expensive by their Oxygen Radical Absorbance Capacity as Choxi's 80 gram Organic Dark Chocolate Bar from the Queen's chocolatier Prestat which you can pick up from selected Tesco stores for £3.60.

Updated Rating:

●●○○○○○○○○


BOW Notice: A zero score or a low score means that in our opinion the business model or the investment model has flaws and/or that we have found inadequate evidence to back up claims about earnings, sales, profits etc. It doesn't mean this evidence does not exist and it doesn't mean that the opportunity is a scam and it doesn't mean that the promoters are unprofessional or dishonest. Questions arising are normally contained within the body of the review, and readers who are interested should contact the company with these questions and/or questions of their own.

__________________________________

BOW contacted the company on 20th January 2009 to invite their comments on this Review. A reminder was sent to the company on 27th January 2009 but no response has ever been received.

__________________________________

EMAIL RECEIVED - 22nd April 2009

Subject: YOU ARE FULL OF SHIT

We have received an email headed "You are full of shit". The email continues, "What your website says about certain things is full of shit ... YOU DO HAVE A VERY biased opinion ... I do not believe you charge for the crap that you send out".

We replied as follows:

Hello,

I am sorry that you are not happy with some of the information on the Business Opportunity Watch website.

I see that you have a website which says that you are a Silver Executive Distributor for Xocai, so I assume that it is the review of Xocai which you object to.

Could you please let me know what information you believe is "full of shit", by which I assume you mean that it is incorrect.

Regards

Marian Owen
Editor of BOW

P.S. I've added your email and this reply to the Xocai review. However, if you would rather that your name did not appear, then I will remove it. (Now done.)

We received a further reply stating that "You are not a member so you do not know all the facts on how it all works". Unfortunately, the person gave no further information about any errors in the review.

However, we immediately then received an email from another Xocai distributor who informed us that she had recently received an email from the company, as follows:

For quite some time we have been working on reformulating the Xocai Protein Bar to eliminate the sucralose. We are proud to announce that we have been able to replace the sucralose with stevia, which has recently been approved as a natural sweetener in the United States.

_________________________________

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