the update won’t affect your theme settings. If you didn’t modify any theme files just switch to another theme (Themes > Appearance), then uninstall the “old” version of Flagship on your server. Afterwards unzip the package you got from themeforest.net ONE time. You should get a folder which contains PSDs, Docs and another zip file (which is called flagship.zip). This zip file is the right file. Go to your wordpress admin panel and navigate to Appearance > Themes. Then select the flagship.zip file, upload & install it.