Disposal and Notice of EGM

Blavod Extreme Spirits PLC
30 August 2007



                   Blavod Extreme Spirits PLC (the 'Company')

     Proposed disposal of the business of Blavod Extreme Spirits USA, Inc.

                                      And

                                 Notice of EGM

The Company announces that it has today posted a circular to shareholders
setting out a resolution to be passed at an Extraordinary General Meeting to be
held on 24 September 2007. The resolution concerns the proposed disposal ('the
Disposal') of BES USA to Black Diamond Spirits, LLC ('the Buyer'), a company
controlled by Jeff Hopmayer, the Company's Chief Executive Officer.

On completion of the Disposal, the Company will receive gross cash proceeds of
US$800,000. In addition, the Buyer will assume the liability for the amounts
owed by BES USA under the Laurus Facility which as at 31 July 2007 totalled
US$3,200,000.

The EGM is to be held at 11.00 am on 24 September 2007 at the offices of Maclay,
Murray & Spens LLP, 12th Floor, One London Wall, London, EC2Y 5AB. To be valid,
Proxy Forms must be returned to the Company's registrars no later than 11.00 am
on 22 September 2007.

Extracts of the text of the Chairman's letter contained within the circular are
set out below. Definitions in this announcement shall bear the same meaning as
those in the circular to Shareholders.

For further information, please contact:

Blavod Extreme Spirits
Colin Campbell (Non-executive Chairman) [phone]

Brewin Dolphin Securities (Nominated Adviser)
Mark Brady/Alison Barrow 0845 270 8600


PROPOSED DISPOSAL OF THE BUSINESS OF BLAVOD EXTREME SPIRITS USA, INC.

Introduction

The Company announces today that its subsidiary, BES USA, has entered into an
agreement to dispose of its US Business to Black Diamond Spirits, LLC, a company
controlled by Jeff Hopmayer, the Company's Chief Executive Officer. As a result
of Mr Hopmayer's interest in the Disposal, it is a related party transaction
within the meaning of the AIM Rules. Mr Hopmayer and the other US-based
Directors (Messrs Falk and Levin) will resign following Completion. Mr Murphy,
the Company's Finance Director, resigned with effect from yesterday on the
signature of the Disposal Agreement to pursue other interests. Mr Hopmayer has
taken no part in the Board's consideration of the terms of the Disposal for the
purposes of making a recommendation to Shareholders.

In view of the size of the US Business in relation to the Company, the Disposal
is conditional upon the approval of Shareholders, which will be sought at the
Extraordinary General Meeting which is being convened for 11.00 am on 24
September 2007, at the offices of Maclay, Murray & Spens LLP, 12th Floor, One
London Wall, London EC2Y 5AB. A notice of the EGM is set out at the end of this
document.

On Completion of the Disposal, Blavod will receive gross cash proceeds of
US$800,000. In addition the Buyer will assume the liability for the amounts owed
by BES USA under the Laurus Facility which as at 31 July 2007 totalled
US$3,200,000. The principal terms of the Disposal are described in more detail
in the paragraph below headed 'Details of the Disposal'.

The purpose of this circular is to explain the background to and reasons for the
Disposal and why your Board considers that it is in the best interests of the
Company and its Shareholders as a whole, and to recommend that Shareholders vote
in favour of the Disposal at the EGM.

Background to and reasons for the Disposal

The US Business was acquired on 20 January 2004 from Extreme Beverage Company
LLC, and is based in Franklin, Tennessee. It carries out the marketing and
selling of various spirits and wines in North America. As well as importing
Blavod Black Vodka, the US Business also handles other products including:

•                 Players Extreme flavoured vodkas and rums;

•                 El Diamante del Cielo tequila; and

•                 A portfolio of Italian wines from various regions.

The El Diamante tequila business is a joint venture with Suntory International
Corporation, which was formed in August 2005 to develop a new range of premium
tequila, initially for the market in the USA. Each partner owns 50 per cent. of
the equity of the joint venture, with Blavod's contribution being solely in
terms of intellectual property. The October 2005 launch in selected US cities
was well received and distribution is currently being expanded to the broader US
market and exports to international markets will begin in the near future.

The results of the US Business for the past two financial years are summarised
below:
--------------------                             ----------          -----------
Year ended 31 March                                  2006                 2007
                                                (audited)          (unaudited)
                                                     £000                 £000
--------------------                            -----------          -----------
Sales                                               3,152                3,787
--------------------                            -----------          -----------
Operating loss                                     (1,902)              (1,960)
Share of loss of joint venture                          -                  (91)
Interest payable                                     (464)                (508)
--------------------                            -----------          -----------
Loss before taxation                               (2,396)              (2,559)
--------------------                            -----------          -----------

The unaudited net assets of the US Business as at 31 March 2007 are summarised
below:
----------------------                                               -----------
As at 31 March                                                            2007
                                                                   (unaudited)
                                                                          £000
----------------------                                               -----------
Fixed assets
Tangible assets                                                             12
Investment in joint venture                                                255
----------------------                                               -----------
Total fixed assets                                                         267
----------------------                                               -----------
Current assets
Stocks                                                                     762
Debtors                                                                    787
Cash                                                                        39
----------------------                                               -----------
Total current assets                                                     1,588
----------------------                                               -----------

Total assets                                                             1,855
----------------------                                               -----------
Liabilities
Creditors                                                                1,287
Amounts owed to joint ventures                                             255
Amounts owed to Group companies                                          8,673
----------------------                                               -----------
Total liabilities                                                       10,215
----------------------                                               -----------

Net liabilities                                                          8,360
----------------------                                               -----------

This spring the Directors carried out a review of the US Business and its future
prospects. The review found that:

•       whilst sales continued to grow overall, the rate of increase of the
Company's own brands was slowing so that the growth was increasingly coming from
agency brand business;

•       gross margins were suffering erosion in the US market;

•       the Company's advertising and promotional spending behind the brands
was falling as a consequence of sales and margin erosion;

•       it had not been possible to reduce costs further, because of the need
to maintain a strong sales force to support the brands; and

•       the US Business would require a considerable further capital injection
to finance growth of the current portfolio or acquire new brands to enhance
future growth prospects as its existing resources were largely exhausted.

The Directors concluded that the likelihood of the business growing into profit
within an acceptable timescale was insufficient to justify asking shareholders
for further capital.

Having reviewed possible alternatives, including the sale or merger of the
Company, the Directors concluded that the Company as it is currently constituted
is not attractive as there are few synergies between its UK operations and the
US Business, with Blavod the only brand sold in both geographic markets. The
management of these two geographically diverse businesses within a single,
AIM-quoted company has proved complex, cumbersome and costly. Most importantly,
the US Business continues to lose money, while the UK is operating profitably on
a monthly basis before allocation of central overheads.

It was with this background that the Independent Directors received an offer
from Mr Hopmayer to purchase the US Business, on the terms set out in this
document. If the Shareholders approve the Disposal, the turnover of the Company
will be approximately halved, but its ongoing losses almost entirely eliminated.
Whilst the remaining business of the Company will be smaller the Independent
Directors believe it will have the following attractive qualities:

•       sales across all major brands are growing in both the UK and export
markets run from the UK;

•       supportive suppliers, who have been consistently loyal in the past;

•       a significantly reduced and tightly monitored cost base;

•       a business with no significant debt; and

•       the ability to achieve profitability within an acceptable timescale.

Following the Disposal the Independent Directors believe that the Company will
be in an improved position to widen its portfolio of brands and thereby build
turnover and a track record of developing small and mid-sized brands.

Details of the Disposal

The Disposal is to be effected by the sale by BES USA of the US Business
pursuant to the terms of the Disposal Agreement. The key terms of the Disposal
Agreement are as follows:

BES USA has conditionally agreed to sell all its business and assets to the
Buyer for US$800,000 in cash. The obligations of the parties under the Disposal
Agreement are conditional on the passing of the Resolution. The Disposal
Agreement may be terminated if it has not become unconditional on or before 28
September 2007.


The Buyer has agreed to assume all known liabilities and continuing obligations
of BES USA as listed in the Disposal Agreement including the sums due to Laurus
under the Laurus Facility but excluding any liability to any employee of BES USA
for any period prior to Completion. The total amount outstanding under the
Laurus Facility as at 31 July 2007 was US$3,200,000. The Disposal Agreement
provides that on Completion releases of the Company and its subsidiaries from
the terms of the Laurus Facility and all guarantees and security given to Laurus
pursuant to the facility (except for the option for Laurus to subscribe for
2,250,000 new Ordinary Shares at a price of 18.48 pence per Ordinary Share) will
be delivered to the Company and BES USA.


BES USA has given certain limited warranties to the Buyer under the Disposal
Agreement confirming its due incorporation and ability to enter into the
Disposal Agreement. BES USA has not given any warranties regarding the US
Business itself.


The Disposal Agreement also contains similar limited warranties by the Buyer in
favour of BES USA. In addition, Mr Hopmayer has given certain warranties
regarding the liabilities of the US Business and confirming that, to his
knowledge, there are no other assets or liabilities of BES USA other than those
to be acquired or assumed by the Buyer or specifically reserved to BES USA under
the Disposal Agreement.


The Disposal Agreement contains indemnities, covenants and undertakings by BES
USA and the Buyer customary for transactions similar to the Disposal.


On completion of the Disposal, Mr Hopmayer will resign from the Board. In
addition Mr Falk and Mr Levin will resign as they are both based in the USA
whereas the Company's operations will be refocused in the UK. Mr Banks and I
will continue as Directors and it is proposed to re-appoint Richard Ambler to
the Board as Managing Director and to re-appoint Willie Phillips to the Board as
part-time Finance Director. The Board will also be seeking to appoint a further
non-executive director when appropriate.


Under a service agreement dated 15 February 2001, as amended, Mr Ambler will
work for the Company as Managing Director. The service agreement is terminable
by the Company on 12 months' written notice or by Mr Ambler on 6 months' written
notice. His salary is £98,000 per annum and is reviewed annually by the Board.
Mr Ambler is entitled to an annual discretionary bonus together with benefits
totalling £15,000 per annum.


It is proposed that Mr Phillips will enter into a consultancy agreement with the
Company to provide his services as a director for 6 days a month for a monthly
fee of £2,500 plus £500 per diem if his time commitment is more than 6 days a
month. The consultancy agreement will be terminable on 3 months' written notice
by either party.



Use of the Disposal proceeds and financial impact of the Disposal

The Disposal will generate gross proceeds of US$800,000 (representing
approximately £396,700 at the exchange rate prevailing at the day before the
date of this document), which will be returned to the Company's cash balances to
support its remaining operations in the UK. The Independent Directors anticipate
that, after payment of the costs of the Disposal and of a number of outstanding
debts to the Company's advisers, the Company will have cash reserves somewhat in
excess of its Working Capital requirements. The board of directors will review
the future of BES USA following Completion.

The Company intends to continue exporting Blavod vodka to the US Business for
the time-being following Completion on an 'arms-length' basis although the
longer term basis for such trade will be subject to mutual consent and
agreement.

Current trading

The Company intends to publish its statement of preliminary results for the year
ended 31 March 2007 in late September. The Independent Directors expect that
these results, which are currently unaudited and are subject to adjustment on
audit and consolidation, will show a slightly increased net operating loss
before taxation of some £3,200,000 on turnover of approximately £7,000,000.

In the first quarter of the current financial year these trends have continued.
Sales in the USA were approximately £630,000, compared with approximately
£790,000 in the UK, which is now operating profitably on a monthly basis before
allocation of central overheads.

Extraordinary General Meeting

The EGM is to be held at 11.00 am on 24 September 2007 at the offices of Maclay,
Murray & Spens LLP, 12th Floor, One London Wall, London, EC2Y 5AB. To be valid,
Proxy Forms must be returned to the Company's registrars no later than 11.00 am
on 24 September 2007. The sole business of the EGM is to propose the Resolution
to approve the Disposal.

Recommendation

The Independent Directors, who have been so advised by the Company's nominated
adviser, Brewin Dolphin, consider that the terms of the Disposal are fair and
reasonable insofar as the Shareholders are concerned. In advising the Board,
Brewin Dolphin has taken into account the Board's commercial assessment of the
Disposal.

Accordingly, the Independent Directors unanimously recommend Shareholders to
vote in favour of the Resolution, as they intend to do so in respect of their
own beneficial shareholdings amounting to 50,000 Ordinary Shares which represent
approximately 0.08 per cent. of the Company's existing issued share capital. Mr
Hopmayer, who is a related party has undertaken not to vote on the Resolution
(and to procure that no other person shall exercise any voting rights in respect
of the Resolution in relation to any Ordinary Shares in which he is interested).


Ends



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