Flagship to acquire Colombia Timber assets with acquisition of REM Forest
Products Inc.

/NOT FOR DISTRIBUTION TO UNITED STATES WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES. THIS NEWS RELEASE DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES IN THE UNITED STATES. THE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO U.S. PERSONS UNLESS REGISTERED UNDER THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE./

TSX VENTURE EXCHANGE: TSX-V: FII

VANCOUVER, July 8 /CNW/ - Flagship Industries Inc., (FII: TSX-V) ("Flagship") is pleased to announce that it has entered into a non-binding letter of intent with REM Forest Products Inc. ("REM Forest") effective July 7, 2010, relating to a reverse takeover transaction (the "REM Forest Transaction"), pursuant to which Flagship proposes to acquire all of the issued and outstanding securities of REM Forest in exchange for the issuance of securities of Flagship.

Trading in the shares of Flagship has been halted in accordance with the policies of the TSX Venture Exchange (the "TSXV") and will remain halted until such time as all required documentation has been filed with and accepted by the TSXV and permission to resume trading has been obtained from the TSXV.

    
    Transaction Summary
    -------------------
    

The REM Forest Transaction is expected to be effected by way of share purchase agreement where the holders of all of the issued and outstanding securities of REM Forest will receive securities in Flagship. REM Forest will become a wholly-owned subsidiary of Flagship, which will change its name to reflect its new business (the "Resulting Issuer"). Under the terms of the REM Forest Transaction:

    
    1.  each REM Forest shareholder will receive 2.1 common shares in the
        Resulting Issuer (the "Resulting Issuer Shares") for every common
        share of REM Forest (the "REM Forest Shares") held, which after
        completion of certain pre-closing transactions is expected to result
        in the issuance of 75,282,234 Resulting Issuer Shares;

    2.  each REM Forest warrant holder will receive 2.1 warrants in the
        Resulting Issuer (the "Resulting Issuer Warrants") for every warrant
        of REM Forest (the "REM Forest Warrants") held.  Each Resulting
        Issuer Warrant will be exercisable at $0.05 per Resulting Issuer
        Share if exercised on or before the closing of the REM Forest
        Transaction (the "Closing") and exercisable for two years at $0.10
        per Resulting Issuer Share if exercised following the Closing, which
        after completion of certain pre-closing transactions is expected to
        result in the issuance of up to 13,398,000 Resulting Issuer Warrants;

    3.  certain key management members of REM Forest will be granted the
        right to be issued a further 25,000,000 Resulting Issuer Shares (in
        aggregate) at nominal consideration subject to satisfying certain
        performance criteria to be determined;

    4.  incentive stock options to purchase up to 17,000,000 Resulting Issuer
        Shares at a price of $0.22 will be granted to management, directors,
        advisors and charities as determined by the parties.  These will
        include 2,041,928 Resulting Issuer options to be issued to selling
        security holders of REM Forest; and

    5.  Flagship has advanced $250,000 to REM Forest to use for working
        capital.
    

Upon completion of the REM Forest Transaction, the Resulting Issuer will carry on the business of timber development, production and marketing in Colombia.

Flagship will be required to obtain the approval of its shareholders and the TSX Venture Exchange (the "Exchange") to give effect to the REM Forest Transaction.

The REM Forest Transaction is an arm's length transaction.

    
    Private Placement
    -----------------
    

In connection with or prior to the Closing, Flagship will complete a private placement of not less than CDN$5,000,000 and not more than CDN$5,500,000 of subscription receipts (the "Subscription Receipts") at a price of $0.20 per Subscription Receipt (the "REM Forest Private Placement"). The gross proceeds of the REM Forest Private Placement are to be deposited in escrow at closing pending satisfaction of certain escrow release conditions including, among other things, the satisfaction of all conditions precedent to the REM Forest Transaction (collectively, the "Escrow Release Conditions"). Each Subscription Receipt will be automatically convertible for no additional consideration, and without any further action by the holder thereof, into one unit (each, a "Unit") of the Resulting Issuer on the Closing of the REM Forest Transaction. Each Unit shall be comprised of one Resulting Issuer Share and one Resulting Issuer share purchase warrant entitling the holder to purchase one additional Resulting Issuer Share at an exercise price of $0.35 per share for a period of five years from the date of the Closing of the REM Forest Transaction. If the Escrow Release Conditions are not satisfied prior to 5:00 p.m. on September 30, 2010, Flagship will be required to redeem the Subscription Receipts for cancellation at a redemption price per Subscription Receipt equal to the issue price thereof and a pro rata amount of any interest earned on the escrowed funds to the date of redemption. In connection with the REM Forest Private Placement, Flagship has agreed to pay to a finder a cash commission equal to 6.0% of the gross proceeds of the REM Forest Private Placement.

Endeavour Financial Corporation will be issued such number of Resulting Issuer Shares (estimated to be 1,505,645 Resulting Issuer Shares) as is equal to 2% of the number of Resulting Issuer Shares issued in aggregate to REM Forest shareholders and will receive a cash fee equal to 1% of the proceeds of the REM Forest Private Placement pursuant to the terms of its mandate agreements with Flagship.

    
    Conditions Precedent to Completing the REM Forest Transaction
    -------------------------------------------------------------
    

The parties' obligations to complete the REM Forest Transaction are subject to the satisfaction of a number of conditions including, but not limited to, completion of satisfactory due diligence reviews, execution of definitive documentation including a formal share purchase agreement (the "Definitive Agreement"), completion of the REM Forest Private Placement, Exchange approval, REM Forest shareholder agreement, the approval of the shareholders of Flagship, and other conditions customary for a transaction of this type.

    
    Directors of the Resulting Issuer
    ---------------------------------
    

As the number of directors of Flagship is currently limited to four, the board of directors of the Resulting Issuer will initially be comprised of Donald Hayes, Harold Hayes, Harald Ludwig and Grant Stonehouse. It is anticipated that at Flagship's annual general meeting ("AGM") scheduled for September 2010, the board will be increased up to eight directors to be determined by the parties prior to entering into the Definitive Agreement, to include Donald Hayes, Harold Hayes, Gordon Keep, Harald Ludwig and Grant Stonehouse. Flagship will procure duly executed resignations and releases in favour of the Resulting Issuer, effective at the Closing, from each director and officer of Flagship who will no longer be serving in such capacities. At the Closing, Donald Hayes will be appointed CEO and Harold Hayes will be appointed COO of the Resulting Issuer.

The nominees of REM Forest that will initially comprise the board of directors and officers of the Resulting Issuer are:

Donald P. Hayes - Chief Executive Officer and Director is currently Chair of the board of directors of British Columbia Ferry Services Inc. and the B.C. Ferry Authority. He is President/CEO of Hayes Group, which was previously one of the largest private timber services providers in British Columbia. Mr. Hayes is a Chartered Accountant (British Columbia) and has a Bachelor of Commerce degree from the University of British Columbia.

Harold F. Hayes - Chief Operating Officer and Director is Senior - Vice President in charge of operations of the Hayes Group, which was previously one of the largest private timber services providers in British Columbia. Mr. Hayes has extensive experience in timber development, production and marketing and has a Bachelor of Arts from Simon Fraser University.

Harald Ludwig - Director is currently Co-Chairman of the Board of Lions Gate Entertainment Corporation. Since 1985 Mr. Ludwig has served as President of Macluan Capital Corporation, a leveraged buy-out company. Mr. Ludwig is a director of West Fraser Timber Company Ltd., a public company listed on the Toronto Stock Exchange and one of North America's largest forest products companies. He also serves as an adviser to Tennenbaum Capital Partners, LLC, a private investment firm.

Grant Stonehouse - Director is President and founder of the Davis Strait Group of Companies focused in the Canadian harvesting, processing and distribution of seafood. Mr. Stonehouse also serves as Chairman of the Board of Fisher King Seafoods Ltd., which is a joint venture company with the Nichirei Company of Japan and as Lead Director of Landdrill International Inc, which is a specialized Canadian contract drilling company operating in worldwide mining and mineral exploration.

Ian Telfer will be a senior advisor and consultant to the Resulting Issuer.

    
    About REM Forest
    ----------------
    

REM Forest is a Nova Scotia domiciled forest products company focused on international hardwood timber development, production and marketing. REM Forest is a private company with approximately 33 shareholders, of which the 4 largest are Donald Hayes, Harold Hayes, Timo Seppanen and Rhimac Holdings Limited.

    
    REM Forest Properties
    ---------------------
    

REM Forest, through its Colombian domiciled subsidiary, REM International CISA, has entered into an initial exclusive timber license agreement (the "Timber Agreement"). The Timber Agreement provides it with the exclusive right to harvest 1,050,000 cubic meters of hardwood from a 44,596 hectares region located in Bahia Solano, Department of Choco on the west coast of the Republic of Colombia.

The Timber Agreement was entered into with the community of Los Delfines with the support and cooperation of the Government of Colombia. Pursuant to Colombian forestry regulations, the Government of Colombia has authorized the cutting, harvesting and export of logs harvested under the Timber Agreement.

REM International CISA will be one of the first to harvest and export from what the International Tropical Timber Organization (ITTO) calls one of the world's largest untapped hardwood timber supplies.

The harvesting will be carried out using sustainable, selective, low intensity, helicopter logging which is both highly regarded as having low environmental impact and involves no 'clear cutting'. All required environmental, export and port permits are either issued or pending issuance subject to the start of commercial operations. A pre-production Forest Stewardship Council certification ("FSC") review has been completed and application for FSC certification will be made when commercial operations have commenced.

REM Forest intends to explore the opportunity to increase the number of forest licences in Colombia and significantly increase the amount of timber shipped over the next 5 years.

The use of proceeds from the REM Forest Private Placement, along with the existing working capital in Flagship (which is expected to be approximately $5.5 million at the Closing of the REM Forest Transaction), will be allocated as follows:

    
    Acquisition of Fixed Assets                                   $2,800,000
    Administrative and Overhead Pre-Operation costs               $2,615,000
    Repayment of Debt and Accrued Liabilities                     $1,615,000
    Acquisition of Additional Forest Licences and working
     capital                                                      $3,470,000
    

Flagship advanced $250,000 to REM Forest concurrent with the signing of the letter of intent to enable it to start the process of building the business. If the Definitive Agreement is executed by September 30, 2010, the Flagship loan shall become non-repayable by REM Forest unless REM Forest or its securityholders breach the terms of the Definitive Agreement and as a result the Definitive Agreement is terminated by Flagship. If the Definitive Agreement is not executed by such date or if it is executed and REM Forest or its securityholders breach the terms thereof and as a result the Definitive Agreement is terminated by Flagship, the Flagship loan shall be repaid on demand by Flagship on or after November 30, 2010.

    
    Selected Financial Information of REM Forest
    --------------------------------------------
    

The following unaudited financial information for the period ended May 31, 2010 has been provided by REM Forest. Such information is subject to all other information contained in the relevant financial statements disclosed in the Filing Statement to be prepared in connection with the REM Forest Transaction.

During the period from incorporation through May 31, 2010, REM Forest raised cash net proceeds of approximately CDN$3.9 million from the issuance of REM Forest Shares and debt and used these funds in investing activities, principally for acquisition of the camp and pre-operating costs including forestry engineering for the initial cutting permits from the Timber Agreement. As at May 31, 2010, REM Forest had $16,000 of cash.

    
    Outstanding Securities of REM Forest
    ------------------------------------

    Currently, there are:

    1.  33,458,683 REM Forest Shares issued and outstanding. A further
        2,390,000 REM Forest Shares are expected to be issued before Closing;

    2.  5,600,000 REM Forest Warrants issued and outstanding which are
        exercisable for two years from the date of issue to purchase an
        aggregate of 5,600,000 REM Forest Shares at $0.10 per share. A
        further 780,000 REM Forest Warrants exercisable for two years from
        the date of issue at $0.10 per share are expected to be issued before
        Closing; and

    3.  800,000 options issued and outstanding to purchase an aggregate of
        800,000 REM Forest Shares at $0.30 per share.
    

Other than the above, no other stock options, warrants or other securities entitling holders to acquire REM Forest Shares are outstanding. REM Forest is not a reporting issuer and its securities are not listed or posted for trading on any stock exchange.

    
    Resulting Issuer Capitalization
    -------------------------------
    

Assuming the completion of the maximum amount of the Private Placement, the Resulting Issuer will have at Closing approximately 218,794,254 issued common shares, 25,000,000 performance shares issuable, 40,898,000 warrants and 21,950,000 options outstanding.

    
    Haywood Sponsorship
    -------------------
    

Haywood Securities Inc. ("Haywood"), subject to completion of satisfactory due diligence, has agreed to act as sponsor to Flagship in connection with the REM Forest Transaction, in consideration for which Flagship will pay Haywood a sponsorship fee of $75,000, of which $15,000 has been paid and the balance is payable on the delivery of Haywood's final sponsor report to the Exchange. Haywood will also be reimbursed for the reasonable expenses incurred in respect of this sponsorship. An agreement to sponsor should not be construed as any assurance with respect to the merits of the transaction or the likelihood of completion.

Completion of the REM Forest Transaction is subject to a number of conditions, including Exchange acceptance and shareholder approval. The REM Forest Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Filing Statement to be prepared in connection with the REM Forest Transaction, any information released or received with respect to the REM Forest Transaction may not be accurate or complete and should not be relied upon. Trading in securities of Flagship should be considered highly speculative.

    
    Forward-Looking Information
    ---------------------------
    

This news release contains "forward-looking information", which may include, but is not limited to, statements with respect to the future financial or operating performance of Flagship, REM Forest and its subsidiaries. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Flagship and REM Forest to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements contained herein are made as of the date of this press release and Flagship and REM Forest disclaim, other than as required by law, any obligation to update any forward-looking statements whether as a result of new information, results, future events, circumstances, or if management's estimates or opinions should change, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.

The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction described herein and has neither approved nor disapproved the contents of this news release.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

All information contained in this news release with respect to REM Forest was supplied by REM Forest for inclusion herein.

The securities of Flagship being offered have not been, nor will be, registered under the U.S. Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent U.S. registration or an applicable exemption from U.S. registration requirements. This news release does not constitute an offer or sale of securities in the United States.

SOURCE FLAGSHIP INDUSTRIES INC.

For further information: For further information: Gordon Keep, President and Director, Suite 3123 - 595 Burrard Street, Vancouver, BC, V7X 1J1, (604) 609-6110

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