INTELLECTUAL PROPERTY SECURITY AGREEMENT

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                                                                    Exhibit 10.4



                    INTELLECTUAL PROPERTY SECURITY AGREEMENT

        INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "AGREEMENT" dated as of
August 6, 2004, by and among Aquatic Cellulose International Corp., a Nevada
corporation (the "COMPANY"), and the secured parties signatory hereto and their
respective endorsees, transferees and assigns (collectively, the "SECURED
PARTY").

                              W I T N E S S E T H :

        WHEREAS, pursuant to a Securities Purchase Agreement, dated the date
hereof, between Company and the Secured Party (the "PURCHASE AGREEMENT"),
Company has agreed to issue to the Secured Party and the Secured Party has
agreed to purchase from Company certain of Company's 10% Secured Convertible
Debentures, due two years from the date of issue (the "DEBENTURES"), which are
convertible into shares of Company's Common Stock, par value $.001 per share
(the "COMMON STOCK"). In connection therewith, Company shall issue the Secured
Party certain Common Stock purchase warrants dated as of the date hereof to
purchase the number of shares of Common Stock indicated below each Secured
Party's name on the Purchase Agreement (the "WARRANTS"); and

        WHEREAS, in order to induce the Secured Party to purchase the
Debentures, Company has agreed to execute and deliver to the Secured Party this
Agreement for the benefit of the Secured Party and to grant to it a first
priority security interest in certain Intellectual Property (defined below) of
Company to secure the prompt payment, performance and discharge in full of all
of Company's obligations under the Debentures and exercise and discharge in full
of Company's obligations under the Warrants; and

        NOW, THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:

                1.      DEFINED TERMS. Unless otherwise defined herein, terms
which are defined in the Purchase Agreement and used herein are so used as so
defined; and the following terms shall have the following meanings:

                "COMPANY" shall mean, collectively, Company and all of the
        present and future subsidiaries of Company, a list of which is contained
        in SCHEDULE A, attached hereto.

                "SOFTWARE INTELLECTUAL PROPERTY" shall mean:

                        (a)     all software programs (including all source
code, object code and all related applications and data files), whether now
owned, upgraded, enhanced, licensed or leased or hereafter acquired by the
Company, above;

                        (b)     all computers and electronic data processing
hardware and firmware associated therewith;


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                        (c)     all documentation (including flow charts, logic
diagrams, manuals, guides and specifications) with respect to such software,
hardware and firmware described in the preceding clauses (a) and (b); and

                        (d)     all rights with respect to all of the foregoing,
including, without limitation, any and all upgrades, modifications, copyrights,
licenses, options, warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights, renewal rights and
indemnifications and substitutions, replacements, additions, or model
conversions of any of the foregoing.

                "COPYRIGHTS" shall mean (a) all copyrights, registrations and
        applications for registration, ISSUED or filed, including any reissues,
        extensions or renewals thereof, by or with the United States Copyright
        Office or any similar office or agency of the United States, any state
        thereof, or any other country or political subdivision thereof, or
        otherwise, including, all rights in and to the material constituting the
        subject matter thereof, including, without limitation, any referred to
        in SCHEDULE B hereto, and (b) any rights in any material which is
        copyrightable or which is protected by common law, United States
        copyright laws or similar laws or any law of any State, including,
        without limitation, any thereof referred to in SCHEDULE B hereto.

                "COPYRIGHT LICENSE" shall mean any agreement, written or oral,
        providing for a grant by the Company of any right in any Copyright,
        including, without limitation, any thereof referred to in SCHEDULE B
        hereto.

                "INTELLECTUAL PROPERTY" shall means, collectively, the Software
        Intellectual Property, Copyrights, Copyright Licenses, Patents, Patent
        Licenses, Trademarks, Trademark Licenses and Trade Secrets.

                "OBLIGATIONS" means all of the Company's obligations under this
        Agreement and the Debentures, in each case, whether now or hereafter
        existing, voluntary or involuntary, direct or indirect, absolute or
        contingent, liquidated or unliquidated, whether or not jointly owed with
        others, and whether or not from time to time decreased or extinguished
        and later decreased, created or incurred, and all or any portion of such
        obligations or liabilities that are paid, to the extent all or any part
        of such payment is avoided or recovered directly or indirectly from the
        Secured Party as a preference, fraudulent transfer or otherwise as such
        obligations may be amended, supplemented, converted, extended or
        modified from time to time.

                "PATENTS" shall mean (a) all letters patent of the United States
        or any other country or any political subdivision thereof, and all
        reissues and extensions thereof, including, without limitation, any
        thereof referred to in SCHEDULE B hereto, and (b) all applications for
        letters patent of the United States and all divisions, continuations and
        continuations-in-part thereof or any other country or any political
        subdivision, including, without limitation, any thereof referred to in
        SCHEDULE B hereto.

                "PATENT LICENSE" shall mean all agreements, whether written or
        oral, providing for the grant by the Company of any right to
        manufacture, use or sell any invention covered by a Patent, including,
        without limitation, any thereof referred to in SCHEDULE B hereto.

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                "SECURITY AGREEMENT" shall mean the a Security Agreement, dated
        the date hereof between Company and the Secured Party.

                "TRADEMARKS" shall mean (a) all trademarks, trade names,
        corporate names, company \names, business names, fictitious business
        names, trade styles, service marks, logos and other source or business
        identifiers, and the goodwill associated therewith, now existing or
        hereafter adopted or acquired, all registrations and recordings thereof,
        and all applications in connection therewith, whether in the United
        States Patent and Trademark Office or in any similar office or agency of
        the United States, any state thereof or any other country or any
        political subdivision thereof, or otherwise, including, without
        limitation, any thereof referred to in SCHEDULE B hereto, and (b) all
        reissues, extensions or renewals thereof.

                "TRADEMARK LICENSE" shall mean any agreement, written or oral,
        providing for the grant by the Company of any right to use any
        Trademark, including, without limitation, any thereof referred to in
        SCHEDULE B hereto.

                "TRADE SECRETS" shall mean common law and statutory trade
        secrets and all other confidential or proprietary or useful information
        and all know-how obtained by or used in or contemplated at any time for
        use in the business of the Company (all of the foregoing being
        collectively called a "TRADE SECRET"), whether or not such Trade Secret
        has been reduced to a writing or other tangible form, including all
        documents and things embodying, incorporating or referring in any way to
        such Trade Secret, all Trade Secret licenses, including each Trade
        Secret license referred to in SCHEDULE B hereto, and including the right
        to sue for and to enjoin and to collect damages for the actual or
        threatened misappropriation of any Trade Secret and for the breach or
        enforcement of any such Trade Secret license.

                2.      GRANT OF SECURITY INTEREST. In accordance with Section
3(m) of the Security Agreement, to secure the complete and timely payment,
performance and discharge in full, as the case may be, of all of the
Obligations, the Company hereby, unconditionally and irrevocably, pledges,
grants and hypothecates to the Secured Party, a continuing security interest in,
a continuing first lien upon, an unqualified right to possession and disposition
of and a right of set-off against, in each case to the fullest extent permitted
by law, all of the Company's right, title and interest of whatsoever kind and
nature in and to the Intellectual Property (the "SECURITY INTEREST").

                3.      REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants, and covenants and agrees with, the Secured Party as
follows:

                        (a)     The Company has the requisite corporate power
and authority to enter into this Agreement and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by the Company
of this Agreement and the filings contemplated therein have been duly authorized
by all necessary action on the part of the Company and no further action is
required by the Company. This Agreement constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditor's rights
generally.

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                        (b)     The Company represents and warrants that it has
no place of business or offices where its respective books of account and
records are kept (other than temporarily at the offices of its attorneys or
accountants) or places where the Intellectual Property is stored or located,
except as set forth on SCHEDULE A attached hereto;

                        (c)     The Company is the sole owner of the
Intellectual Property (except for non-exclusive licenses granted by the Company
in the ordinary course of business), free and clear of any liens, security
interests, encumbrances, rights or claims, and is fully authorized to grant the
Security Interest in and to pledge the Intellectual Property. There is not on
file in any governmental or regulatory authority, agency or recording office an
effective financing statement, security agreement, license or transfer or any
notice of any of the foregoing (other than those that have been filed in favor
of the Secured Party pursuant to this Agreement) covering or affecting any of
the Intellectual Property. So long as this Agreement shall be in effect, the
Company shall not execute and shall not knowingly permit to be on file in any
such office or agency any such financing statement or other document or
instrument (except to the extent filed or recorded in favor of the Secured Party
pursuant to the terms of this Agreement), except for a financing statement
covering assets acquired by the Company after the date hereof, provided that the
value of the Intellectual Property covered by this Agreement along with the
Collateral (as defined in the Security Agreement) is equal to at least 150% of
the Obligations.

                        (d)     The Company shall at all times maintain its
books of account and records relating to the Intellectual Property at its
principal place of business and its Intellectual Property at the locations set
forth on SCHEDULE A attached hereto and may not relocate such books of account
and records unless it delivers to the Secured Party at least 30 days prior to
such relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that the
necessary documents have been filed and recorded and other steps have been taken
to perfect the Security Interest to create in favor of the Secured Party valid,
perfected and continuing first priority liens in the Intellectual Property to
the extent they can be perfected through such filings.

                        (e)     This Agreement creates in favor of the Secured
Party a valid security interest in the Intellectual Property securing the
payment and performance of the Obligations and, upon making the filings required
hereunder, a perfected first priority security interest in such Intellectual
Property to the extent that it can be perfected through such filings.

                        (f)     Upon request of the Secured Party, the Company
shall execute and deliver any and all agreements, instruments, documents, and
papers as the Secured Party may request to evidence the Secured Party's security
interest in the Intellectual Property and the goodwill and general intangibles
of the Company relating thereto or represented thereby, and the Company hereby
appoints the Secured Party its attorney-in-fact to execute and file all such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power being coupled with an interest is irrevocable
until the Obligations have been fully satisfied and are paid in full.

                        (g)     The execution, delivery and performance of this
Agreement does not conflict with or cause a breach or default, or an event that
with or without the passage of time

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or notice, shall constitute a breach or default, under any agreement to which
the Company is a party or by which the Company is bound. No consent (including,
without limitation, from stock holders or creditors of the Company) is required
for the Company to enter into and perform its obligations hereunder.

                        (h)     The Company shall at all times maintain the
liens and Security Interest provided for hereunder as valid and perfected first
priority liens and security interests in the Intellectual Property to the extent
they can be perfected by filing in favor of the Secured Party until this
Agreement and the Security Interest hereunder shall terminate pursuant to
Section 11. The Company hereby agrees to defend the same against any and all
persons. The Company shall safeguard and protect all Intellectual Property for
the account of the Secured Party. Without limiting the generality of the
foregoing, the Company shall pay all fees, taxes and other amounts necessary to
maintain the Intellectual Property and the Security Interest hereunder, and the
Company shall obtain and furnish to the Secured Party from time to time, upon
demand, such releases and/or subordinations of claims and liens which may be
required to maintain the priority of the Security Interest hereunder.

                        (i)     The Company will not transfer, pledge,
hypothecate, encumber, license (except for non-exclusive licenses granted by the
Company in the ordinary course of business), sell or otherwise dispose of any of
the Intellectual Property without the prior written consent of the Secured
Party.

                        (j)     The Company shall, within ten (10) days of
obtaining knowledge thereof, advise the Secured Party promptly, in sufficient
detail, of any substantial change in the Intellectual Property, and of the
occurrence of any event which would have a material adverse effect on the value
of the Intellectual Property or on the Secured Party's security interest
therein.

                        (k)     The Company shall permit the Secured Party and
its representatives and agents to inspect the Intellectual Property at any time,
and to make copies of records pertaining to the Intellectual Property as may be
requested by the Secured Party from time to time.

                        (l)     The Company will take all steps reasonably
necessary to diligently pursue and seek to preserve, enforce and collect any
rights, claims, causes of action and accounts receivable in respect of the
Intellectual Property.

                        (m)     The Company shall promptly notify the Secured
Party in sufficient detail upon becoming aware of any attachment, garnishment,
execution or other legal process levied against any Intellectual Property and of
any other information received by the Company that may materially affect the
value of the Intellectual Property, the Security Interest or the rights and
remedies of the Secured Party hereunder.

                        (n)     All information heretofore, herein or hereafter
supplied to the Secured Party by or on behalf of the Company with respect to the
Intellectual Property is accurate and complete in all material respects as of
the date furnished.

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                        (o)     SCHEDULE A attached hereto contains a list of
all of the subsidiaries of Company.

                        (p)     SCHEDULE B attached hereto includes all
Licenses, and all Patents and Patent Licenses, if any, owned by the Company in
its own name as of the date hereof. SCHEDULE B hereto includes all Trademarks
and Trademark Licenses, if any, owned by the Company in its own name as of the
date hereof. SCHEDULE B hereto includes all Copyrights and Copyright Licenses,
if any, owned by the Company in its own name as of the date hereof. SCHEDULE B
hereto includes all Trade Secrets and Trade Secret Licenses, if any, owned by
the Company as of the date hereof. To the best of the Company's knowledge, each
License, Patent, Trademark, Copyright and Trade Secret is valid, subsisting,
unexpired, enforceable and has not been abandoned. Except as set forth in
SCHEDULE B, none of such Licenses, Patents, Trademarks, Copyrights and Trade
Secrets is the subject of any licensing or franchise agreement. To the best of
the Company's knowledge, no holding, decision or judgment has been rendered by
any Governmental Body which would limit, cancel or question the validity of any
License, Patent, Trademark, Copyright and Trade Secrets . No action or
proceeding is pending (i) seeking to limit, cancel or question the validity of
any License, Patent, Trademark, Copyright or Trade Secret, or (ii) which, if
adversely determined, would have a material adverse effect on the value of any
License, Patent, Trademark, Copyright or Trade Secret. The Company has used and
will continue to use for the duration of this Agreement, proper statutory notice
in connection with its use of the Patents, Trademarks and Copyrights and
consistent standards of quality in products leased or sold under the Patents,
Trademarks and Copyrights.

                        (q)     With respect to any Intellectual Property:

                                (i)     such Intellectual Property is subsisting
                and has not been adjudged invalid or unenforceable, in whole or
                in part;

                                (ii)    such Intellectual Property is valid and
                enforceable;

                                (iii)   the Company has made all necessary
                filings and recordations to protect its interest in such
                Intellectual Property, including, without limitation,
                recordations of all of its interests in the Patents, Patent
                Licenses, Trademarks and Trademark Licenses in the