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Liquidmetal Technologies (OTCQB:LQMT) is a $46 million market cap materials company that has one of the most intriguing disruptive technology stories to come out in many years. It has been an extremely volatile stock lately, as the rumors of inclusion in the iPhone 5 come and go, and as always with an OTC penny stock, it requires a high level of risk tolerance. And therein lies a potentially enormous opportunity.

Liquidmetal was started as a Caltech research project in 1993 and eventually IPO'd on the Nasdaq in 2002 with a $1 billion market cap and $20+ share price. They eventually got delisted to the OTC after the 1-2 punch of poor management decisions and a product that was still in research mode, and therefore not yet ready for prime time production. However, in August 2010, Liquidmetal was able to replace its management with experienced talent and pay off all its outstanding debt, when Apple (NASDAQ:AAPL) paid roughly $20 million to license their technology to be used for personal electronics.

To learn why the world's premiere technology company would take interest in a nearly bankrupt company in the first place, it helps to take a step back in time to Chem 101. Liquidmetal's patented amorphous materials are able to take the best qualities of both traditional metals and plastics. Due to its amorphous atomic structure, liquidmetal does not take on the crystalline shape of other metals, but rather arranges its atoms in completely random formations, like a liquid or plastic. This allows it to be injection-molded into extraordinary precise shapes similar to a plastic, while overcoming the crystalline weakness and necessary machining inherent in other metals.

This video with Jony Ive of Apple shows step by step how the current Macbook Pro chassis is made from a solid block of aluminum:

It takes "9 separate milling operations" and is an incredibly time- and energy-intensive product to essentially drill out each nuance on each chassis. On the other hand, this same chassis made from liquidmetal would be superior in every way: lighter, stronger, scratch- and corrosion-resistant, more elastic, while using dramatically less time, energy and natural resources. It can be poured into a mold like a plastic and be finished in minutes, instead of drilled out of a solid piece of metal, which takes hours. The one downside to liquidmetal is a more expensive starting material, but the speed and ease of its precision production will more than make up for the original higher material cost, especially when production is scaled up.

Apple is notorious for keeping all their parts and component makers under lock and key, so its extremely difficult to find detailed information about Liquidmetal's relationships beyond the original 2010 Intellectual Property license. This has led to what I believe is confusion in the investment community as to what an Apple contract is, really, and also is the source of a great opportunity.

The general shortsighted notion has been that Liquidmetal won't benefit beyond the original $20 million license from Apple, even if they are used in the iPhone 5, but this could not be further from the truth! Liquidmetal's limited manufacturing capacity could never have been able to mass produce a product for Apple on its own, so they have spent the past 8 months partnering with world-class companies up and down the production line. They've partnered with Materion (NYSE:MTRN), a supplier of the raw amorphous material, and with Engel to produce state-of-the-art vacuum-injection molding machines and molds. Lastly ,they partnered with privately held Visseras, their production partner. Therefore any future product that is mass produced for Apple with have 3 potential revenue streams for Liquidmetal, compared to 4 revenue streams and consequently higher margins for every other company that wants to piggyback Apple's use of this material.

Apple's potential inclusion of liquidmetal as a selling point in their iPhone 5, whether strictly being used as the phone chassis, or as PatentlyApple.com has reported over the past year, in a fuel cell chassis, could set LQMT stock on a new trajectory and possibly lead to a potential uplisting back to the Nasdaq - where a company that created and owns such a disruptive technology belongs.

For you technical investors out there: Both the 20dma and now the 50dma have broken above its 200dma, forming a Golden Cross chart formation for the first time since the original AAPL contract in 2010.

Disclosure: I am long OTCQB:LQMT.

Source: The Liquidmetal Technologies Bullish Thesis