EXHIBIT 10.4


                     MUTUAL SETTLEMENT AND RELEASE AGREEMENT

     THIS  SETTLEMENT  AND RELEASE  AGREEMENT  (hereinafter  referred to as this
"Release"),  dated  July 31,  2002,  is  entered  into by and  between  National
Scientific Corporation, a Texas corporation ("NSC"), and Sam Carr, an individual
who resides at 6811 E. Mescal St., Scottsdale, Arizona ("Carr").

     NSC and Carr,  together with their  respective  assigns,  sureties,  heirs,
legal representatives,  subrogees, trustees, guardians,  successors-in-interest,
predecessors-in-interest  and any other person or entity who  hereafter  asserts
any  claims,  right,  or cause of  action  through  or on  behalf  of any of the
foregoing, are hereinafter referred to as "Releasing Parties."

                                    RECITALS

     WHEREAS,  NSC also owes Carr Back Wages ("Back Wages") for deferred  salary
during calendar year 2002 of $21,000 plus accrued interest of $398.05;

     WHEREAS,  Carr has the  following  stock option  Agreements  with NSC dated
which are currently set to expire  shortly  after Carr's  resignation  as an NSC
employee:


                                              Number of      Exercise
     Type of Options     Date of Grant         Options        Price
     ---------------    ----------------    ------------    ---------

     Incentive          December 1, 2000        50,000        $1.84
     Non-Qualified      December 1, 2000       450,000        $1.84
     Non-Qualified      December 1, 2000       100,000         $.46
     Non-Qualified      January 12, 2001        75,000        $2.00
     Non-Qualified      January 24, 2001        75,000        $3.00
     Non-Qualified      January 16, 2002       300,000         $.25


     WHEREAS,  the  Releasing  Parties  have  reached an agreement to settle any
amounts owed to Carr by NSC;

     WHEREAS,  Carr  resigned his position as a member of the Board of Directors
effective July 31, 2002;

     WHEREAS, Carr resigned his position as an Officer of NSC and an employee of
NSC effective July 31, 2002;

     WHEREAS,  the purpose of this  Release is to  memorialize  the terms of the
settlement and to further provide for a general  release  relative to all claims
and causes of action that a  Releasing  Party may now or  hereafter  acquire and
arising from or relating in any way to the Carr Agreement;


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     WHEREAS, the Releasing Parties and each of them, jointly,  separately,  and
severally  desire to settle all matters  between or among them, so that they may
enter into a new relationship where Carr is a non-employee contractor to NSC;

     WHEREAS, the terms of this separate Contractor  Agreement,  dated August 1,
2002, and separate and apart from this Release;

     NOW, THEREFORE, for and in consideration of the settlement by the Releasing
Parties and other good and valuable  consideration,  the  receipt,  adequacy and
sufficiency of which is hereby acknowledged and confessed, the Releasing Parties
hereby agree as follows:

     1. Each of the  foregoing  recitals is  incorporated  in this  Release as a
material term and condition.

     2. Effective July 31, 2002, the Company agrees to use best efforts pay Back
Wages plus accrued interest owed to Carr of $21,398.05 as soon as it has cash on
hand to  reasonably  do so, and in any case no later than it pays its other back
wages claims to other Officers and Directors who have deferred  wages,  and that
the Company will not be released from any of its  obligations to Carr until such
back wages have  between paid in full to Carr.  Regardless,  Carr is entitled to
payment of all such Back Wages upon written demand;

     3. NSC  acknowledges  that Carr has  accrued  wages  from  unpaid  vacation
totaling  $8,775 as of July 31,  2002,  which  represents  101.4 hours of earned
vacation hours at an average hourly wage of $86.54. These hours may be exchanged
for paid  hours  away from the  Company  while not  providing  consulting  (i.e.
consulting  time off), or if any of these hours remain unpaid at the termination
of this agreement, they will be paid in full at that time.

     4. NSC agrees to execute new option agreements on or before August 31, 2002
with Carr that have terms identical to his existing options  agreements,  except
that they would be applicable to a contractor role rather than an employee role;

     5. The Releasing Parties do hereby  compromise,  settle,  fully release and
forever  discharge each other,  and their respective  successors,  predecessors,
employees, agents, attorneys, assigns, representatives,  shareholders, officers,
directors, partners, parents, subsidiaries or affiliated companies, and sureties
from any and all past, present, or future claims,  demands,  actions,  causes of
action,  costs,   judgments,   expenses,   attorney's  fees,  damages,  and  all
liabilities  whatsoever,  at law or in equity,  which the Releasing  Parties now
have,  claim to have, have ever had, or would but for this Release,  have had in
the future arising from, related to or on account of the Settlement Matters.

     6. As a part of the  consideration  for this  Release,  by  executing  this
Release,  each Releasing  Party  expressly  warrants and represents for himself,
itself,  and  each  of  their  respective  heirs,   assigns,   sureties,   legal
representatives, subrogees, trustees, guardians, successors-in-interest, and any
other  person or entity who  hereafter  asserts  any claim,  right,  or cause of
action  through or on behalf of any of the  foregoing,  to each other that:  (i)

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such Releasing  Party is legally  competent to execute this Release or otherwise
has the organization  authority to execute this Release; and (ii) such Releasing
Party has not assigned,  pledged,  or otherwise in any manner whatsoever sold or
transferred,  either by instrument in writing or otherwise, any right, title, or
interest in any Claim.

     7. Each  Releasing  Party  expressly  warrants and  represents  that before
executing  this Release,  each  Releasing  Party has fully  informed  himself or
itself of all the terms,  contents,  conditions and effects of this Release, and
that in making the settlement,  no oral or written promise or  representation of
any kind has been made to him or by any other Releasing  Party, or anyone acting
for any of them,  except as expressly stated herein.  This Release comprises the
entire agreement, oral and written, between and among the Releasing Parties with
regard to the subject matter of this Release. This Release may not be amended in
any respect  except by a writing duly executed by the party sought to be charged
with such amendment.  Each Releasing Party has relied solely and completely upon
his, her or its judgment and the advice of his, her or its attorney.

     8. This Release shall be construed in accordance with the laws of the State
of Arizona, without regard to the conflict of laws principles thereof.

     9. During Carr's  tenure as a Director  with NSC, the Company  provided its
Directors and Officers with Directors and Officers  liability  insurance  (D&O).
The  purpose  of  this  D&O  insurance  was to  limit,  though  not  necessarily
eliminate,  each Director's  individual  liability in the event of a shareholder
lawsuit. Carr and NSC agree that this Mutual Settlement and Release Agreement in
and of itself should in no way affect the insurance  coverage  available to Carr
for liability  arising from future  lawsuits  regarding  acts  performed  during
Carr's  tenure  as a  Director.  . Carr  and NSC  agree  that  any D&O  coverage
available to Directors at the time of Carr's  service  should be applied to Carr
in the same way as it applies to all other then-current  Directors.  The Company
may or may not offer this  protection  to future  Directors,  and the amounts of
coverage for future  Directors  may change,  but that matter is wholly  separate
from this Mutual Settlement and Release Agreement.

     10. The parties agree that the  Indemnity  Agreement  executed  January 23,
2001 continues in effect.

     11. If any  provision  of this  Release or any portion of any  provision of
this Release is at any time deemed or declared void, voidable, or unenforceable,
then such provision or portion of such provision is severable from the remainder
of the Release, and the remainder of this Release shall be enforced fully.

     12.  Each  Releasing  Party  recognizes  that  should  any  action or other
proceeding be brought to enforce this Release,  the party seeking enforcement of
this  Release  shall,  if he or it prevails,  be entitled to recover  reasonable
attorney's  fees and other expenses  incurred in connection  with such action or
proceeding.

     13. EACH RELEASING PARTY  ACKNOWLEDGES  THAT HE OR IT HAS READ THIS RELEASE
IN ITS ENTIRETY AND THAT HE OR IT UNDERSTANDS  AND  APPRECIATES ITS CONTENTS AND
SIGNIFICANCE  AND HEREBY  EXECUTES  THE SAME AND MAKES THE RELEASE  PROVIDED FOR
VOLUNTARILY AND OF HIS OR ITS OWN FREE WILL.

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         IN WITNESS WHEREOF, the Releasing Parties have executed this Release on
July 31, 2002 in Phoenix, Arizona,

NATIONAL SCIENTIFIC CORPORATION            Sam H.Carr

By: /s/ Michael A. Grollman                By:  /s/ Sam H. Carr
   -------------------------------              --------------------------------
Name:      Michael A. Grollman             Name: Sam H. Carr
Title:     Chief Executive Officer

Date:    July 31, 2002                     July 31, 2002


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