1
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED MARCH 31, 1998

IRIDIUM WORLD COMMUNICATIONS LTD.
(Exact name of Registrant as specified in its charter)

BERMUDA 0-22637 52-2025291
(State or other jurisdiction (Commission file Number) (I.R.S. Employer
of incorporation or organization) Identification No.)

CLARENDON HOUSE, 2 CHURCH STREET, HAMILTON HM 11, BERMUDA
(441) 295-5950
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

-----------------------

IRIDIUM LLC
(Exact name of Registrant as specified in its charter)

DELAWARE 0-22637-01 52-1984342
(State or other jurisdiction (Commission file Number) (I.R.S. Employer
of incorporation or organization) Identification No.)

1575 EYE STREET, N.W., WASHINGTON, D.C. 20005
(202) 408-3800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

-----------------------

IRIDIUM OPERATING LLC
(Exact name of Registrant as specified in its charter)

DELAWARE 0-22637-02 52-2066319
(State or other jurisdiction (Commission file Number) (I.R.S. Employer
of incorporation or organization) Identification No.)

1575 EYE STREET, N.W., WASHINGTON, D.C. 20005
(202) 408-3800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

-----------------------

IRIDIUM CAPITAL CORPORATION
(Exact name of Registrant as specified in its charter)

DELAWARE 333-31741-03 52-2048739
(State or other jurisdiction (Commission file Number) (I.R.S. Employer
of incorporation or organization) Identification No.)

1575 EYE STREET, N.W., WASHINGTON, D.C. 20005
(202) 408-3800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

------------------

IRIDIUM IP LLC
(Exact name of Registrant as specified in its charter)

DELAWARE 333-31741-01 52-2048736
(State or other jurisdiction (Commission file Number) (I.R.S. Employer
of incorporation or organization) Identification No.)

1575 EYE STREET, N.W., WASHINGTON, D.C. 20005
(202) 408-3800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

------------------

IRIDIUM ROAMING LLC
(Exact name of Registrant as specified in its charter)

Delaware 333-31741-02 52-2048734
(State or other jurisdiction (Commission file Number) (I.R.S. Employer
of incorporation or organization) Identification No.)

1575 EYE STREET, N.W., WASHINGTON, D.C. 20005
(202) 408-3800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.

Yes X No
- --

SHARES OUTSTANDING
CLASS AT MAY 1, 1998
-------------------------- -----------------------
Iridium World
Communications Ltd. 12,067,783
Common Stock, Class A
$0.01 par value per share

3
IRIDIUM WORLD COMMUNICATIONS LTD.

----------

IRIDIUM LLC

(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

----------

IRIDIUM OPERATING LLC

(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

----------

IRIDIUM CAPITAL CORPORATION

IRIDIUM IP LLC

IRIDIUM ROAMING LLC

----------

INDEX TO FORM 10-Q

----------

PAGE
NUMBER
----------------

PART I FINANCIAL INFORMATION

ITEM 1 Financial Statements

IRIDIUM WORLD COMMUNICATIONS LTD.

Condensed Balance Sheets
March 31, 1998 and December 31, 1997 5

Unaudited Condensed Statements of Loss
For the three months ended March 31, 1998 and 1997 6

Unaudited Condensed Statements of Cash Flows
For the three months ended March 31, 1998 and 1997 7

Notes to Unaudited Condensed Financial Statements 8

IRIDIUM LLC

Condensed Consolidated Balance Sheets
March 31, 1998 and December 31, 1997 10

Unaudited Condensed Consolidated Statements of Loss
For the three months ended March 31, 1998 and 1997 11

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4

PAGE
NUMBER
----------------

Unaudited Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 1998 and 1997 12

Notes to Unaudited Condensed Consolidated Financial Statements 13

IRIDIUM OPERATING LLC, IRIDIUM CAPITAL CORPORATION, IRIDIUM IP LLC,
IRIDIUM ROAMING LLC

Condensed Consolidated Balance Sheets
March 31, 1998 and December 31, 1997 16

Unaudited Condensed Consolidated Statements of Loss
For the three months ended March 31, 1998 and 1997 17

Unaudited Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 1998 and 1997 18

Notes to Unaudited Condensed Consolidated Financial Statements 19

ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 22

PART II OTHER INFORMATION

ITEM 1 Legal Proceedings 28

ITEM 2 Changes in Securities and Use of Proceeds 28

ITEM 3 Defaults upon Senior Securities 28

ITEM 4 Submission of Matters to a Vote of Security Holders 28

ITEM 5 Other Information 28

ITEM 6 Exhibits and Reports on Form 8-K 28

SIGNATURES 29

EXHIBIT INDEX 31

4
5

IRIDIUM WORLD COMMUNICATIONS LTD.

CONDENSED BALANCE SHEETS
(In Thousands Except Share Data)

MARCH 31,
DECEMBER 31, 1998
1997 (UNAUDITED)
---------------- ----------------

ASSETS

Cash.................................................................................... $ - $ -
Investment in Iridium LLC............................................................... 223,922 207,503
---------------- ----------------
Total Assets................................................................ $ 223,922 $ 207,503
================ ================

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities............................................................................. $ - $ -

Stockholders' equity:
Class B Common stock, non-voting, par value $0.01; 2,500,000 shares authorized;
no and 20,625 issued and outstanding............................................. - -
Class A Common stock, voting, par value $0.01; 50,000,000 shares authorized;
12,003,262 and 12,026,402 issued and outstanding................................ 120 120
Additional paid-in capital.......................................................... 242,636 243,643
Accumulated deficit................................................................. (18,834) (36,260)
---------------- ----------------
223,922 207,503
---------------- ----------------
Total liabilities and stockholders' equity.................................. $ 223,922 $ 207,503
================ ================

The accompanying notes are an integral part of these condensed
financial statements.

IRIDIUM WORLD COMMUNICATIONS LTD.

UNAUDITED CONDENSED STATEMENTS OF LOSS
(In Thousands Except Share Data)

THREE MONTHS ENDED
MARCH 31,
---------------------------------------
1997 1998
------------- --------------

Equity in loss of Iridium LLC........................................... $ - $ 17,426
------------- --------------
Loss before income taxes................................................ - 17,426
Income taxes............................................................ - -
------------- --------------
Net loss................................................................ $ - $ 17,426
============= ==============
Net loss per Class A Common share - basic and diluted .................. $ - $ 1.45
------------- --------------
Weighted average shares used in computing
net loss per Class A Common share - basic and diluted................. - 12,008,654
============= ==============

The accompanying notes are an integral part of these condensed
financial statements.

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7
IRIDIUM WORLD COMMUNICATIONS LTD.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
( In Thousands )

THREE MONTHS ENDED
MARCH 31,
---------------------------------------
1997 1998
-------------- ---------------

CASH FLOWS FROM OPERATING ACTIVITIES :
Net loss........................................................... $ - $ (17,426)
Adjustments to reconcile net loss to net cash
used in operating activities -
Equity in loss of Iridium LLC.............................. - 17,426
-------------- ---------------
Net cash used in operating activities.................................. - -
-------------- ---------------

CASH FLOWS FROM INVESTING ACTIVITIES :
Investments in Iridium LLC......................................... - (583)
-------------- ---------------
Net cash used in investing activities.................................. - (583)
-------------- ---------------

CASH FLOWS FROM FINANCING ACTIVITIES :
Proceeds from Class B Common Stock................................. - 275
Proceeds from Class A Common Stock subscribed...................... 12 -
Proceeds from exercise of stock options............................ - 308
-------------- ---------------
Net cash provided by financing activities.......... 12 583
-------------- ---------------

Increase (decrease) in cash............................................ 12 -

CASH, beginning of period.............................................. - -
-------------- ---------------

CASH, end of period.................................................... $ 12 $ -
============== ===============

The accompanying notes are an integral part of these condensed
financial statements.

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8
IRIDIUM WORLD COMMUNICATIONS LTD.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS

Iridium World Communications Ltd. ("IWCL") was incorporated under the laws
of Bermuda on December 12, 1996. At inception, IWCL was wholly owned by
Iridium LLC, a limited liability company. In June 1997, IWCL registered with
the Securities and Exchange Commission a total of 13,800,000 shares of its
Class A Common Stock ("Class A Common Stock") for sale in an initial public
offering (the "Offering"), and on June 13, 1997 IWCL consummated the Offering
and issued 12,000,000 shares of Class A Common Stock. Pursuant to the 1997
Subscription Agreement between IWCL and Iridium LLC, approximately $225 million
in net proceeds from the Offering were invested in Class 1 Membership Interests
of Iridium LLC ("Class 1 Interests"), at which time the outstanding shares of
Class A Common Stock held by Iridium LLC were retired, and IWCL became a member
of Iridium LLC.

Iridium LLC through its wholly-owned subsidiary Iridium Operating LLC
("Iridium"), a Delaware limited liability company, is currently devoting
substantially all of its efforts to establishing and commercializing the
Iridium communications system (the "Iridium System").

IWCL's sole asset is its investment in Iridium LLC. At March 31, 1998,
IWCL's investment was approximately 8.5% of the total outstanding Class 1
Interests in Iridium LLC.

2. BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments necessary for a fair presentation
of the financial position of IWCL as of March 31, 1998 and its results of
operations and its cash flows for the three month period then ended. These
condensed financial statements are unaudited and do not include all related
footnote disclosures. These financial statements should be read in conjunction
with the audited financial statements of IWCL and footnotes thereto included in
the Annual Report on Form 10-K and the audited financial statements of Iridium
LLC and the footnotes thereto included in this Report and the Annual Report on
Form 10-K.

Since its inception on December 12, 1996 through March 31, 1998, IWCL has
not entered into any operating transactions or incurred any expenses. The
results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results of operations expected in the future.

3. STOCKHOLDERS' EQUITY

GLOBAL OWNERSHIP PROGRAM

IWCL and Iridium LLC have commenced a Global Ownership Program which is
designed to offer up to an aggregate of 2,500,000 shares of IWCL's Class B
Common Stock at a purchase price of $13.33 per share to certain governmental
telecommunication administrations and related entities as part of a
comprehensive program to enhance market access, improve the competitive standing
of the Iridium System and achieve appropriate regulatory approvals. At the time
of issuance, purchasers of Class B Common Stock will be required to pay only an
amount equal to the per share par value of the Class B Common Stock; $.01 per
share. The balance of the purchase price will be payable through the
withholding of dividends, if any, which would otherwise be payable on the shares
of Class B Common Stock. A holder of Class B Common Stock may elect to pay the
purchase price in cash at any time. Class B Common Stock is convertible to
Class A Common Stock on a one-for-one basis, subject to anti-dilution
adjustments, once certain conditions are met, including full payment for the
shares and expiration of a minimum holding period. The proceeds generated from
each sale of Class B Common Stock are used to purchase Class 1 Interests in
Iridium LLC. The payment terms with respect to such Iridium LLC Class 1
Interests will mirror the payment terms on the Class B Common Stock. As of
March 31, 1998, 20,625 shares of Class B Common Stock had been issued under this
program resulting in net proceeds of $275,000 to IWCL. The shares were issued at
a fair value of $33.88 per share (the trading price of the Class A Common Stock
at the date of issue). In accordance with the Share Issuance Agreement, the net
proceeds were invested in Class I Interests of Iridium LCC.

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9
IRIDIUM WORLD COMMUNICATIONS LTD.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

4. EARNINGS PER SHARE

Basic earnings (loss) per Class A Common share is calculated by dividing
net income (loss) by the weighted average number of Class A Common shares
outstanding during the period. Diluted earnings (loss) per share is calculated
by dividing net income (loss) by the weighted average number of Class A Common
shares and, to the extent dilutive, other potentially dilutive securities
outstanding during the period. Potentially dilutive securities are comprised of
warrants to purchase Class A Common Stock issued in conjunction with the Series
A Notes and stock options. Due to the loss incurred during the three months
ended March 31, 1998, the impact of the warrants and stock options is
anti-dilutive and is not included in the diluted earnings (loss) per share
calculation.

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10

IRIDIUM LLC
( A Development Stage Limited Liability Company )

CONDENSED CONSOLIDATED BALANCE SHEETS
( In Thousands Except Member Interest Data )

MARCH 31,
DECEMBER 31, 1998
1997 (UNAUDITED)
-------------- -------------

ASSETS

Current assets :
Cash and cash equivalents............................................................ $ 9,040 $ 192,160
Restricted cash...................................................................... 350,220 -
Due from affiliates.................................................................. 13,604 13,560
Prepaid expenses and other current assets............................................ 6,612 7,494
-------------- -------------
Total current assets............................................................. 379,476 213,214
Property and equipment, net.............................................................. 1,526,326 2,059,217
System under construction................................................................ 1,625,054 1,259,475
Other assets............................................................................. 114,831 96,433
-------------- -------------
Total assets..................................................................... $ 3,645,687 $ 3,628,339
============== =============

LIABILITIES AND MEMBERS' EQUITY

Current liabilities :

Accounts payable and accrued expenses................................................ $ 106,794 $ 95,167
Accounts payable to Member........................................................... 10,601 112,616
Bank facilities, current portion..................................................... 350,000 350,000
-------------- -------------
Total current liabilities........................................................ 467,395 557,783
Bank facilities, net of current portion.................................................. 210,000 285,000
Long-term debt due to Members............................................................ 273,302 285,078
Notes payable, $1,100,000 principal amount............................................... 1,054,288 1,055,129
Other liabilities........................................................................ 6,065 7,922
-------------- -------------
Total liabilities................................................................ 2,011,050 2,190,912
-------------- -------------

Commitments and Contingencies
Members' equity:
Class 2 Interests, authorized 50,000 interests for Series M; authorized an
aggregate of 300,000 interests for Series A, Series B and Series C:
Series M, convertible, no interests issued and outstanding.................... - -
Series A, redeemable, convertible, 39,907 and 41,354 interests issued and
outstanding; liquidation value of $39,907 and $41,354 ..................... 39,907 41,354
Series B, redeemable, 1 interest issued and outstanding....................... - -
Series C, redeemable, 75 interests issued and outstanding..................... - -
Class 1 Interests, authorized 225,000,000 interests, 141,222,442 and
141,266,207 interests issued and outstanding..................................... 2,024,220 2,029,079
Deferred Class 1 Interest compensation................................................ (1,454) (1,404)
Adjustment for minimum pension liability.............................................. (643) (643)
Deficit accumulated during the development stage...................................... (427,393) (630,959)
-------------- -------------
Total members' equity............................................................. 1,634,637 1,437,427
-------------- -------------
Total liabilities and members' equity............................................. $ 3,645,687 $ 3,628,339
============== =============

The accompanying notes are an integral part of these condensed
consolidated financial statements.

IRIDIUM LLC
( A Development Stage Limited Liability Company )

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(In Thousands Except Member Interest Data)

THREE MONTHS ENDED PERIOD FROM
MARCH 31, JUNE 14, 1991
------------------------------------- (INCEPTION) THROUGH
1997 1998 MARCH 31, 1998
---------------- ---------------- ------------------

OPERATING EXPENSES

Sales, general and administrative.................... $ 35,823 $ 60,511 $ 373,812
Depreciation and amortization........................ 231 107,791 229,220
---------------- ---------------- ------------------
Total operating expenses......................... 36,054 168,302 603,032
OTHER INCOME
Interest expense (income), net....................... (126) 35,264 19,956
---------------- ---------------- ------------------
Loss before provision for income taxes................... 35,928 203,566 622,988
Provision for income taxes............................... - - 7,971
---------------- ---------------- ------------------
Net loss................................................. $ 35,928 $ 203,566 $ 630,959
================ ================ ==================
Preferred dividend requirement........................... 1,674 1,447
---------------- ----------------
Net loss applicable to Class 1 Interests................. $ 37,602 $ 205,013
================ ================
Net loss per Class 1 Interest - basic and diluted........ $ 0.31 $ 1.45
================ ================
Weighted average interests used in computing
net loss per Class 1 Interest - basic and diluted...... 120,836,025 141,227,834
================ ================

The accompanying notes are an integral part of these condensed
consolidated financial statements.

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12

IRIDIUM LLC
( A Development Stage Limited Liability Company )

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
( In Thousands )

THREE MONTHS ENDED PERIOD FROM
MARCH 31, JUNE 14, 1991
-------------------------- (INCEPTION) THROUGH
1997 1998 MARCH 31, 1998
----------- ------------ ----------------

CASH FLOWS FROM OPERATING ACTIVITIES :
Net loss................................................................. $ (35,928) (203,566) $ (630,959)
Adjustments to reconcile net loss to net cash
used in operating activities -
Depreciation and amortization.................................... 231 107,791 229,220
Expense recognized for warrants issued in
connection with debt guarantee................................ 17,536 5,261 86,595
Employee Class 1 Interests compensation.......................... - 50 202
Loss on diposal of assets........................................ - - 87
Changes in assets and liabilities:

Increase in prepaid expenses and other current assets........ (875) (882) (7,494)
Decrease (Increase) in due from affiliates................... (871) 44 (13,560)
Increase in other assets..................................... (13,465) (11,506) (30,165)
(Decrease) Increase in accounts payable and accrued expenses. 331 (11,627) 37,167
Increase (Decrease) in other liabilities..................... (1,788) 1,857 7,842
---------- ------------ -------------
Net cash used in operating activities.................... (34,829) (112,578) (321,065)
---------- ------------ -------------

CASH FLOWS FROM INVESTING ACTIVITIES :
Purchases of property and equipment...................................... (1,224) (4,532) (27,787)
Additions to system under construction................................... (109,439) (124,743) (3,216,178)
---------- ------------ -------------
Net cash used in investing activities.................... (110,663) (129,275) (3,243,965)
---------- ------------ -------------

CASH FLOWS FROM FINANCING ACTIVITIES :
Net proceeds from issuance of Class 1 and Class 2 Interests.............. - 583 1,932,902
Net proceeds from issuance of senior notes and warrants.................. - - 1,277,642
Borrowings under guaranteed bank line of credit.......................... 160,000 75,000 1,235,000
Payments under guaranteed bank line of credit............................ - - (950,000)
Borrowings under senior secured line of credit........................... - - 350,000
Decrease in restricted cash.............................................. - 350,220 -
Deferred financing costs................................................. (738) (830) (88,354)
---------- ------------ -------------
Net cash provided by financing activities................ 159,262 424,973 3,757,190
---------- ------------ -------------

Increase in cash and cash equivalents........................................ 13,770 183,120 192,160

CASH AND CASH EQUIVALENTS, beginning of period............................... 1,889 9,040 -
---------- ------------ -------------

CASH AND CASH EQUIVALENTS, end of period..................................... $ 15,659 $ 192,160 $ 192,160
========== ============ =============

The accompanying notes are an integral part of these condensed
consolidated financial statements.

13
IRIDIUM LLC
(A Development Stage Limited Liability Company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS

Iridium LLC (the "Parent") and its subsidiaries are devoting their present
efforts to developing and commercializing a global wireless system -- the
Iridium(R) Communications System (the "Iridium System") -- that will enable
subscribers to send and receive telephone calls virtually anywhere in the world
- -- all with one phone, one phone number and one customer bill.

Iridium, Inc. was incorporated on June 14, 1991. Iridium, Inc. operated as
a wholly-owned subsidiary of Motorola, Inc. ("Motorola") until July 29, 1993.
On July 29, 1993, Iridium, Inc. closed on, and had its first capital draw
under, a private placement of shares of Common Stock, subscribed to by U. S.
and foreign investors. As a result of three private placements of equity, five
supplemental private placements with certain additional equity investors and
proceeds received from the initial public offering of common stock of Iridium
World Communications Ltd. ("IWCL"), Motorola's direct and indirect Class 1
Membership Interest in the Parent has been reduced to approximately 18% as of
March 31, 1998, before considering unexercised warrants held by Motorola.

On July 29, 1996, the Parent was formed as a limited liability company,
under the terms and conditions of the limited liability agreement ("LLC
Agreement"), pursuant to the provisions of the Delaware limited liability
company act. Also on July 29, 1996, Iridium, Inc. was merged with and into the
Parent, with the Parent as the surviving entity. Concurrent with the merger,
all shares of Common Stock of Iridium, Inc. were exchanged for Class 1
Membership Interests in the Parent ("Class 1 Interests").

On December 18, 1997, the Parent entered into an asset drop-down
transaction ("the Asset Drop-Down Transaction") with Iridium Operating LLC
("Iridium"), a newly formed wholly-owned subsidiary of the Parent. Pursuant to
the Asset Drop-Down Transaction, substantially all of the assets and
liabilities of the Parent were transferred to Iridium, including, without
limitation, all liabilities with respect to the outstanding 13% Senior Notes
due 2005, Series A and 14% Senior Notes due 2005, Series B and the 11 1/4%
Senior Notes due 2005, Series C (collectively, the "Senior Notes"). Pursuant to
the indentures relating to the Senior Notes, Iridium has been substituted for
the Parent, and the Parent has been released from all obligations under the
indentures relating to the Senior Notes. All assets and liabilities were
transferred to Iridium at the Parent's carrying value. Accordingly, unless
otherwise specified, references within these notes to Iridium that relate to
any action prior to the date of the Asset Drop-Down Transaction should be
construed as references to Parent, as predecessor of Iridium. As a result of
the Asset Drop-Down Transaction, the Parent's only significant asset is its
investment in Iridium.

Iridium has contracted with Motorola to design, develop, produce and
deliver into orbit the space segment component of the Iridium System. The
scheduled date for delivery of the $3.45 billion space segment is in 1998.
Iridium plans to begin its commercial operations in September 1998.

The Iridium Communications System is subject to regulation by the Federal
Communications Commission ("FCC"), and by foreign administrations and
regulatory bodies. On January 31, 1995, Motorola obtained a license from the
FCC to construct, launch and operate the Iridium System, subject to certain
conditions.

2. BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of only
normal recurring accruals, necessary for a fair presentation of the financial
position of the Parent and subsidiaries as of March 31, 1998, and the results
of their operations and their cash flows for the three month period ended March
31, 1998 and 1997, and the period from June 14, 1991 (inception) through March
31, 1998. These condensed consolidated financial statements are unaudited, and
do not include all related footnote disclosures. The results of operations for
the three months ended March 31, 1998 are not necessarily indicative of the
results of operations expected in the future, although the Parent will continue
to be a development stage limited liability company until the commencement of
commercial operations and anticipates a net loss for the year. These financial
statements should be read in conjunction with the Parent's audited consolidated
financial statements and footnotes

13
14
IRIDIUM LLC
(A Development Stage Limited Liability Company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

thereto included in the Annual Report on Form 10-K.

3. MEMBERS' EQUITY

The Parent declared approximately $1,447,000 and $1,674,000 of in-kind
dividends to holders of Series A Class 2 Membership Interests during the three
month periods ended March 31, 1998 and 1997, respectively.

GLOBAL OWNERSHIP PROGRAM

The Parent, in conjunction with IWCL, has commenced a Global Ownership
Program which is designed to offer up to an aggregate of 2,500,000 shares of
IWCL's Class B Common Stock at a purchase price of $13.33 per share to certain
governmental telecommunication administrations and related entities as part of a
comprehensive program to enhance market access, improve the competitive standing
of the Iridium System and achieve appropriate regulatory approvals. As of March
31, 1998, 20,625 shares of Class B Common Stock had been issued under this
program resulting in net proceeds of $275,000 to IWCL. In accordance with the
Share Issuance Agreement, IWCL invested the net proceeds in Parent in exchange
for 20,625 Class I Interests. The shares were issued at a fair value of $33.88
per share (the trading price of IWCL's Class A Common Stock at the date of
issue) with the difference between the purchase price and fair value capitalized
to license costs. During the three months ended March 31, 1998, $424,000 was
capitalized to license costs under this program. No amounts were capitalized
during the three months ended March 31, 1997.

4. SUPPLEMENTAL CASH FLOW INFORMATION

During the three months ended March 31, 1998 and 1997, $79,447,000 and
$18,712,000, respectively, of interest costs were incurred. Interest expensed
for the three months ended March 31, 1998 was $40,000,000 with the remaining
interest capitalized to the system under construction. For the three months
ended March 31, 1997, all interest expense was capitalized to the system under
construction. Interest paid was $75,408,000 and $2,453,000 during the three
months ended March 31, 1998 and 1997, respectively.

5. TRANSACTIONS WITH MEMBERS

GUARANTEED BANK FACILITY

In accordance with the Second Amended and Restated Agreement Regarding
Guarantee, dated May 11, 1998, between the Parent and Motorola, pursuant to
which Motorola guaranteed the Parent's obligations under the Guaranteed Bank
Facility, an additional 6,103 and 20,343 warrants to purchase 457,725 and
1,525,725 Class 1 Interests were earned by Motorola during the three months
ended March 31,1998 and 1997, respectively. The Parent recognized $5,261,000 as
expense during the three months ended March 31, 1998 in connection with the
warrants earned by Motorola.

The Second Amended and Restated Agreement Regarding Guarantee provides
that, when the Guaranteed Bank Facility and Motorola's Guarantee have been
permanently reduced to $275 million or less, Parent has the option to
compensate Motorola for its Guarantee by continuing to pay warrant compensation
at the existing rate or paying (i) interest on the guaranteed amount at a rate
based on the difference between the interest rate on the Guaranteed Bank
Facility and the interest rate on the Series A and Series B Senior Notes of
Iridium Operating LLC plus (ii) substantially reduced warrant compensation based
on the number of warrants issued in connection with the offering of the Series A
Notes (the "High Yield Compensation").

On May 13, 1998, Iridium permanently reduced the commitment of the bank
lenders under the Guaranteed Bank Facility from $450 million to $275 million.
As a result of the reduction, the maximum number of warrants Motorola may earn
as compensation for their guarantee of that facility until maturity in June
1999 is 97,859 warrants to purchase approximately 7,339,447 Class 1 Interests
(assuming Iridium pays High Yield Compensation through maturity).

Currently, Parent has elected to pay Motorola High Yield Compensation.
While Parent expects that electing to pay High Yield Compensation will reduce
the effective cost of the Motorola Guarantee, there can be no assurance that
such expectation will prove correct or that the Motorola Guarantee will not
exceed $275 million.

14
15
IRIDIUM LLC
(A Development Stage Limited Liability Company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6. EARNINGS PER SHARE

Basic earnings (loss) per Class 1 Interest is calculated by dividing net
income (loss), after considering required dividends on Class 2 Interests, by
the weighted average number of Class 1 Interests outstanding during the period.
Diluted earnings (loss) per share is calculated by dividing net income (loss),
after considering required dividends on Class 2 Interests, by the weighted
average number of Class 1 Interests and, to the extent dilutive, other
potentially dilutive securities outstanding during the period. Potentially
dilutive securities are comprised of options, warrants, and convertible Class 2
Interests. Due to the losses incurred during the three months ended March 31,
1998, the impact of other potentially dilutive securities is anti-dilutive and
is not included in the diluted earnings (loss) per Class 1 Interest
calculation.

7. COMPREHENSIVE INCOME

In June 1997, the Financial Accounting Standards Board issued Statement
No. 130, Reporting Comprehensive Income. Accumulated other comprehensive
income (loss) consists entirely of the minimum pension liability. The new
disclosure requirements with respect to comprehensive income for the three
months ended March 31, are as follows:

1998 1997
---------- ---------

Comprehensive income (loss):
Net loss, as reported . . . . . . . . . . . . . $(203,566) $(35,928)
Other comprehensive income (loss) . . . . . . . - -
-------- -------
Total . . . . . . . . . . . . . . . . . . . . . $(203,566) $(35,928)
======== =======

Accumulated other comprehensive income (loss):
Beginning of period . . . . . . . . . . . . . . $(643) $(733)
====== ======
End of period . . . . . . . . . . . . . . . . . $(643) $(733)
====== ======

8. SUBSEQUENT EVENT

On May 13, 1998, Iridium and Iridium Capital Corporation completed an
offering of $350 million principal amount of 10 7/8% Senior Notes due 2005,
Series D ("Series D Notes"). The Series D Notes are guaranteed by Iridium
Roaming LLC, Iridium IP LLC and Iridium Facilities Corporation. The Series D
Notes have substantially the same terms as the Senior Notes other than interest
rate and issue date. The net proceeds received were approximately $342
million. Interest on the Series D Notes is payable in cash semi-annually on
January 15 and July 15 of each year, commencing on July 15, 1998. The Series D
Notes are redeemable at the option of Iridium, in whole or in part, at any time
on or after July 15, 2002. The Series D Notes mature on July 15, 2005.

15
16
IRIDIUM OPERATING LLC
( A Wholly-Owned Subsidiary of Iridium LLC )
( A Development Stage Limited Liability Company )

CONDENSED CONSOLIDATED BALANCE SHEETS
( In Thousands )

MARCH 31,
DECEMBER 31, 1998
1997 (UNAUDITED)
-------------- --------------

ASSETS
Current assets :
Cash and cash equivalents.................................. $ 5,940 $ 192,160
Restricted cash ........................................... 350,220 -
Due from affiliates........................................ 13,604 13,560
Prepaid expenses and other current assets.................. 6,612 7,494
-------------- --------------
Total current assets................................... 376,376 213,214
Property and equipment, net .................................. 1,526,326 2,059,217
System under construction .................................... 1,625,054 1,259,475
Other assets .................................................. 114,831 95,884
-------------- --------------
Total assets........................................... $ 3,642,587 $ 3,627,790
============== ==============

LIABILITIES AND MEMBER'S EQUITY

Current liabilities :
Accounts payable and accrued expenses...................... $ 106,794 $ 95,167
Accounts payable to Parent's Members....................... 10,601 112,616
Bank facilities, current portion........................... 350,000 350,000
-------------- --------------
Total current liabilities.............................. 467,395 557,783
Bank facilities, net of current portion........................ 210,000 285,000
Long-term debt due to Parent's Members......................... 273,302 285,078
Notes payable, $1,100,000 principal amount..................... 1,054,288 1,055,129
Other liabilities.............................................. 6,065 7,922
-------------- --------------
Total liabilities...................................... 2,011,050 2,190,912
-------------- --------------

Commitments and Contingencies
Member's equity :

Member's Interest.......................................... 2,059,421 2,068,278
Deficit accumulated during the development stage........... (427,241) (630,757)
Adjustment for minimum pension liability................... (643) (643)
-------------- --------------
Total member's equity.................................. 1,631,537 1,436,878
-------------- --------------
Total liabilities and member's equity.................. $ 3,642,587 $ 3,627,790
============== ==============

The accompanying notes are an integral part of these condensed
consolidated financial statements.

17
IRIDIUM OPERATING LLC

( A Wholly-Owned Subsidiary of Iridium LLC )
( A Development Stage Limited Liability Company )

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(In Thousands)

THREE MONTHS ENDED PERIOD FROM
MARCH 31, JUNE 14, 1991
------------------------------------ (INCEPTION) THROUGH
1997 1998 MARCH 31, 1998
---------------- --------------- ----------------

OPERATING EXPENSES
Sales, general and administrative..................... $ 35,823 $ 60,461 $ 373,610
Depreciation and amortization......................... 231 107,791 229,220
---------------- --------------- ----------------
Total operating expenses.......................... 36,054 168,252 602,830
OTHER INCOME
Interest expense (income), net........................ (126) 35,264 19,956
---------------- --------------- ----------------
Loss before provision for income taxes.................... 35,928 203,516 622,786
Provision for income taxes................................ - - 7,971
---------------- --------------- ----------------
Net loss.................................................. $ 35,928 $ 203,516 $ 630,757
================ =============== ================

The accompanying notes are an integral part of these condensed
consolidated financial statements.

18
IRIDIUM OPERATING LLC

( A Wholly-Owned Subsidiary of Iridium LLC )
( A Development Stage Limited Liability Company )

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
( In Thousands )

THREE MONTHS ENDED PERIOD FROM
MARCH 31, JUNE 14, 1991
--------------------------- (INCEPTION) THROUGH
1997 1998 MARCH 31, 1998
----------- ----------- ----------------

CASH FLOWS FROM OPERATING ACTIVITIES :
Net loss.................................................................... $ (35,928) (203,516) $ (630,757)
Adjustments to reconcile net loss to net cash
used in operating activities -
Depreciation and amortization....................................... 231 107,791 229,220
Expense recognized for warrants issued in
connection with debt guarantee................................... 17,536 5,261 86,595
Loss on diposal of assets........................................... - - 87
Changes in assets and liabilities:
Increase in prepaid expenses and other current assets........... (875) (882) (7,494)
Decrease (Increase) in due from affiliates...................... (871) 44 (13,560)
Increase in other assets........................................ (13,465) (10,958) (29,617)
(Decrease) Increase in accounts payable and accrued expenses.... 331 (11,627) 37,167
Increase (Decrease) in other liabilities........................ (1,788) 1,857 7,842
----------- ----------- -----------
Net cash used in operating activities....................... (34,829) (112,030) (320,517)
----------- ----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES :
Purchases of property and equipment......................................... (1,224) (4,532) (27,787)
Additions to system under construction...................................... (109,439) (124,743) (3,216,178)
----------- ----------- -----------
Net cash used in investing activities....................... (110,663) (129,275) (3,243,965)
----------- ----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES :
Net proceeds from issuance of Parent's Class 1 and Class 2 Interests........ - 583 1,932,902
Net proceeds from issuance of senior notes and warrants..................... - - 1,277,642
Borrowings under guaranteed bank line of credit............................. 160,000 75,000 1,235,000
Payments under guaranteed bank line of credit............................... - - (950,000)
Borrowings under senior secured line of credit.............................. - - 350,000
Decrease in restricted cash................................................. - 350,220 -
Deferred financing costs.................................................... (738) (830) (88,354)
Transfer to Parent.......................................................... - 2,552 (548)
----------- ----------- -----------
Net cash provided by financing activities................... 159,262 427,525 3,756,642
----------- ----------- -----------

Increase in cash and cash equivalents........................................... 13,770 186,220 192,160

CASH AND CASH EQUIVALENTS, beginning of period.................................. 1,889 5,940 -
----------- ----------- -----------

CASH AND CASH EQUIVALENTS, end of period........................................ $ 15,659 $ 192,160 $ 192,160
=========== =========== ===========

The accompanying notes are an integral part of these condensed
consolidated financial statements.

19
IRIDIUM OPERATING LLC
(A Wholly-Owned Subsidiary of Iridium LLC)
(A Development Stage Limited Liability Company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS

Iridium Operating LLC ("Iridium"), a wholly-owned subsidiary of Iridium
LLC (the "Parent") is devoting its present efforts to developing and
commercializing a global wireless system -- the Iridium(R) Communications
System (the "Iridium System") -- that will enable subscribers to send and
receive telephone calls virtually anywhere in the world -- all with one phone,
one phone number and one customer bill.

Iridium, Inc. was incorporated on June 14, 1991. Iridium, Inc. operated as
a wholly-owned subsidiary of Motorola, Inc. ("Motorola") until July 29, 1993.
On July 29, 1993, Iridium, Inc. closed on, and had its first capital draw
under, a private placement of shares of Common Stock, subscribed to by U.S.
and foreign investors. As a result of three private placements of equity, five
supplemental private placements with certain additional equity investors and
proceeds received from the initial public offering of common stock of Iridium
World Communications Ltd. ("IWCL"), Motorola's direct and indirect Class 1
Membership Interest in the Parent has been reduced to approximately 18% as of
December 31, 1997, before considering unexercised warrants held by Motorola.

2. BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of only
normal recurring accruals, necessary for a fair presentation of the financial
position of Iridium and subsidiaries as of March 31, 1998, and the results of
their operations and their cash flows for the three month period ended March
31, 1998 and 1997, and the period from June 14, 1991 (inception) through March
31, 1998. These condensed consolidated financial statements are unaudited, and
do not include all related footnote disclosures. The results of operations for
the three months ended March 31, 1998 are not necessarily indicative of the
results of operations expected in the future, although Iridium will continue to
be a development stage limited liability company until the commencement of
commercial operations and anticipates a net loss for the year. These financial

19
20
IRIDIUM OPERATING LLC
(A Wholly-Owned Subsidiary of Iridium LLC)
(A Development Stage Limited Liability Company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

statements should be read in conjunction with Iridium's audited consolidated
financial statements and footnotes thereto included in the Annual Report on
Form 10-K.

3. SUPPLEMENTAL CASH FLOW INFORMATION

4. TRANSACTIONS WITH MEMBERS

GUARANTEED BANK FACILITY

In accordance with the Agreement Regarding Guarantee between the Parent
and Motorola, pursuant to which Motorola guaranteed the Parent's obligations
under the Guaranteed Bank Facility, an additional 6,103 and 20,343 warrants to
purchase 457,725 and 1,525,725 Class 1 Interests were earned by Motorola during
the three months ended March 31,1998 and 1997, respectively. The Parent
recognized $5,261,000 as expense during the three months ended March 31, 1998
in connection with the warrants earned by Motorola.

On May 13, 1998, Iridium permanently reduced the commitment of the bank
lenders under the Guaranteed Bank Facility from $450 million to $275 million.
As a result of the reduction, the maximum number of warrants Motorola may earn
as compensation for their guarantee of that facility until maturity in June
1999 is 104,384 warrants to purchase approximately 7,828,822 Class 1 Interests.

5. COMPREHENSIVE INCOME

In June 1997, the Financial Accounting Standards Board issued Statement
No. 130, Reporting Comprehensive Income. Accumulated other comprehensive
income consists entirely of the minimum pension liability. The new disclosure
requirements with respect to comprehensive income for the three months ended
March 31, are as follows:

1998 1997
---------- --------

Comprehensive income (loss):
Net loss, as reported . . . . . . . . . . . . . $(203,516) $(35,928)
Other comprehensive income (loss) . . . . . . . - -
-------- -------
Total . . . . . . . . . . . . . . . . . . . . . $(203,516) $(35,928)
======== =======

Accumulated other comprehensive income (loss):
Beginning of period . . . . . . . . . . . . . . $(643) $(733)
====== ======
End of period . . . . . . . . . . . . . . . . . $(643) $(733)
====== ======

6. SUBSEQUENT EVENT

20
21
IRIDIUM OPERATING LLC
(A Wholly-Owned Subsidiary of Iridium LLC)
(A Development Stage Limited Liability Company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. IRIDIUM SUBSIDIARIES

The Senior Notes are co-issued by Iridium and Iridium Capital
Corporation ("Capital") and are fully and unconditionally guaranteed, jointly
and severally, on a senior unsecured basis by Iridium Roaming LLC, Iridium IP
LLC and Iridium Facilities Corporation (collectively, the "Guarantor
Subsidiaries" and together with Capital, the "Iridium Subsidiaries"). Each of
the Iridium Subsidiaries is a wholly-owned subsidiary of Iridium and, as of
March 31, 1998, Iridium has no subsidiaries other than the Iridium
Subsidiaries. Capital was formed and capitalized by the Parent on June 16, 1997
(subscribed capital of $100). Iridium Roaming LLC was formed by the Parent on
June 15, 1997. Iridium IP LLC was formed by the Parent on February 28, 1997. In
connection with the Asset Drop-Down Transaction, Parent's interest in Capital,
Iridium Roaming LLC and Iridium IP LLC was transferred to Iridium. Iridium
Facilities Corporation was formed by Iridium on February 6, 1998.

The following is summarized financial information of Capital as of March
31, 1998 and for the period from inception through March 31, 1998. Full
financial statements of Capital are not presented because management believes
they are not material to investors.

MARCH 31, 1998
--------------

Current assets . . . . . . . . . . . . $ 0
Total assets . . . . . . . . . . . . . 0
Current liabilities . . . . . . . . . . 0
Total liabilities . . . . . . . . . . . 0

FOR THE PERIOD FROM
INCEPTION THROUGH
MARCH 31, 1998
----------------------

Net revenues . . . . . . . . . . . . . $ 0
Cost of services . . . . . . . . . . . 0
Net loss . . . . . . . . . . . . . . . 0

Iridium has recognized the obligations relating to the Series A Notes, the
Series B Notes and the Series C Notes because Iridium expects to have the
operations to service such obligations.

The following is summarized financial information of the Guarantor
Subsidiaries as of March 31, 1998 and for the period from inception of each of
the Guarantor Subsidiaries through March 31, 1998. Full financial statements of
the Guarantor Subsidiaries are not presented because management believes they
are not material to investors.

MARCH 31, 1998
--------------

Current assets . . . . . . . . . . . . . . $ 0
Total assets . . . . . . . . . . . . . . . 0
Current liabilities . . . . . . . . . . . . 0
Total liabilities . . . . . . . . . . . . . 0

FOR THE PERIOD FROM
INCEPTION THROUGH
MARCH 31, 1998
----------------------

Net revenues . . . . . . . . . . . . . . . $ 0
Cost of services . . . . . . . . . . . . . 0
Net loss . . . . . . . . . . . . . . . . . 0

21
22

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This quarterly report is filed jointly by Iridium World Communications Ltd.
("IWCL"), Iridium LLC ("Parent"), Iridium Operating LLC ("Iridium"), Iridium
Capital Corporation ("Capital"), Iridium Roaming LLC ("Roaming") and Iridium IP
LLC ("IP").

IWCL was incorporated by Parent as an exempted company under the Companies
Act 1981 of Bermuda on December 12, 1996. IWCL is organized to act as a member
of Parent and to have no other business. On June 13, 1997, IWCL consummated an
initial public offering (the "IWCL IPO") of 12,000,000 shares of its Class A
Common Stock, par value $0.01 per share (the "Class A Common Stock") and
applied the net proceeds of approximately $225 million to purchase 12,000,000
Class 1 Membership Interests in Parent. As of March 10, 1998, IWCL owned
approximately 8.5% of the outstanding Class 1 Membership Interests in Parent.

Parent was formed as a limited liability company pursuant to the provisions
of the Delaware Limited Liability Company Act (the "Delaware Act") on July 16,
1996. Parent's purpose is to acquire, own and manage the Iridium communications
system (the "Iridium System").

Iridium was formed as a limited liability company pursuant to the provisions
of the Delaware Act on October 23, 1997. Iridium is a wholly-owned subsidiary
of Parent and has the same purpose as Parent.

On December 18, 1997, Parent and Iridium effected an asset drop-down
transaction (the "Asset Drop-Down Transaction") pursuant to which substantially
all of the assets and liabilities of Parent were transferred to Iridium. The
Asset Drop-Down Transaction was effected for the purpose of providing the agent
for the secured lenders under Iridium's $1 billion Secured Bank Facility (as
defined) with an efficient means for obtaining a security interest in the
membership interests in Iridium.

Capital is a Delaware corporation and a wholly-owned subsidiary of Iridium.
Capital has no business other than serving as a co-issuer of Iridium's $1.1
billion in aggregate principal amount of Senior Notes (as defined) and
guarantor of Iridium's Secured Bank Facility (as defined). Capital has no
significant assets and does not conduct any operations.

Roaming, a Delaware limited liability company and a wholly-owned subsidiary
of Iridium, is the entity that enters into roaming agreements with other
wireless telecommunications providers on behalf of Iridium. IP, also a Delaware
limited liability company and a wholly-owned subsidiary of Iridium, holds the
worldwide trademark registrations of Iridium. Each of Roaming and IP is a
guarantor of the Senior Notes and the Secured Bank Facility. The Senior Notes
and the Secured Bank Facility also are guaranteed by a new wholly-owned
subsidiary of Iridium, Iridium Facilities Corporation, a Delaware Corporation
("Facilities"). Facilities is the entity which holds certain real property of
Iridium.

IWCL acts as a member of Parent and has no other business. The business of
Iridium constitutes substantially all of Parent's business. The business of
Iridium is described below. Any reference below to Iridium relating to any
event prior to the Asset Drop-Down Transaction should be interpreted as a
reference to the Parent, as predecessor to Iridium.

IWCL's sole assets are its Class 1 Interests and its Parent Interest
Warrants, and IWCL's results of operations reflect its proportionate share of
the results of operations of Parent on an equity accounting basis. IWCL has no
operations other than those related to its interest in Parent and, indirectly,
Iridium. Accordingly, management's discussion and analysis addresses the
financial condition and results of operations of Parent and Iridium.

Iridium is currently devoting substantially all of its efforts to establishing
and commercializing the Iridium System. As such, Iridium's current principal
activities relate to managing the design, construction and development of the
system and preparing for its day-to-day operations.

22
23

LIQUIDITY AND CAPITAL RESOURCES

Funding Requirements

Iridium expects to commence commercial operations on September 23, 1998.
Iridium currently estimates that aggregate cash funding requirements from the
commencement of development (June 1991) through the anticipated commencement of
commercial operations will be approximately $4.5 billion. At March 31, 1997 and
1998, Iridium had expended approximately $2.42 billion (or 54%) and
approximately $3.66 billion (or 81%), respectively, of such $4.5 billion
estimate. Iridium estimates aggregate cash funding requirements of
approximately $5.5 billion (net of assumed revenues following commencement of
commercial operations) through year-end 1999, the last year in which Iridium
projects negative cash flow and a net increase in year-end borrowings. At March
31, 1997 and 1998, Iridium had expended, since inception, approximately $2.42
billion (or 44%) and approximately $3.66 billion (or 67%), respectively, of
such $5.5 billion estimate. While Iridium has raised sufficient funds to meet
its expected pre-commercial operations project costs, Iridium expects to
require significant additional funding after commencement of commercial
operations. These projections of aggregate funding needs assume that Iridium
will not be required to make any payments under the Standby Equipment Purchase
Commitments (as defined). In addition, such projections are forward looking
and could vary, perhaps substantially, from actual results, due to events
outside of the control of Iridium, including without limitation unforeseen
construction, systems integration or regulatory delays, launch failures and
lower than anticipated customer demand.

With respect to the development and construction of the Iridium System,
Iridium and Motorola are parties to (i) the Space System Contract for the
design, development, production and delivery in orbit of the space segment,
(ii) the Terrestrial Network Development Contract to design the gateway
hardware and software, and (iii) the Operations and Maintenance Contract to
provide day-to-day management of the space segment after deployment and to
monitor, upgrade and replace hardware and software of the space segment as
necessary to maintain performance specifications. Substantially all of the
initial capital raised by Iridium is being used and will continue to be used to
make payments to Motorola under the Space System Contract and, to a lesser
extent, the Terrestrial Network Development Contract. The Space System Contract
provides for a fixed price of $3.45 billion (subject to certain adjustments),
scheduled to be paid by Iridium to Motorola over approximately a five-year
period for completion of milestones under the contract. Payments under the
Operations and Maintenance Contract will be payable quarterly and are expected
to aggregate approximately $2.88 billion over such contract's initial five-year
term (assuming commencement of commercial operations on September 23, 1998 and
no excusable delays), in addition to the cost of certain spare satellites at
the completion of the contract. The payments increase each year, ranging from
quarterly payments of $129.4 million in 1998 to $157.4 million in 2003 to
$171.4 million in 2005. If Iridium exercises its option to extend the
Operations and Maintenance Contract for an additional two years, the payments
due for that two-year extension are expected to aggregate approximately $1.33
billion (assuming commencement of commercial operations on September 23, 1998
and no excusable delays). The Terrestrial Network Development Contract provides
for payments aggregating approximately $284 million. As a result of
technological developments, changes in the product mix of Iridium World
Services, and scheduling adjustments, including the implementation of Iridium
World Cellular Services into Iridium's service offerings, there have been, and
Iridium anticipates there will be, amendments and interpretations of the Space
System Contract, the Terrestrial Network Development Contract and the
Operations and Maintenance Contract and other agreements and letters with
Motorola which may increase the total costs of these contracts. While Iridium's
estimate of the cost of anticipated amendments and interpretations is reflected
in Iridium's estimates of its funding requirements, there can be no assurance
that any such amendments or interpretations will not affect the price and terms
of those agreements in a manner not reflected in Iridium's funding estimates.

Through March 31, 1998, the Parent and Iridium incurred expenditures totaling
$3.1 billion to Motorola under the Space System Contract in respect of
completed milestones and expenditures totaling $148 million under the
Terrestrial Network Development Contract. Based on estimates and the planned
schedule as of March 31, 1998, Iridium's expected future cash requirements by
year under the contracts through December 31, 1999 are approximately as follows
(in millions):

23
24

1998 1999
---- -----

Space System Contract . . . . . . . . . . . . . . . . $489 $ --
Terrestrial Network Development Contract . . . . . . 86 63
Operations and Maintenance Contract . . . . . . . . . 129 537

Iridium will also require funds for working capital, business software
development, interest on anticipated borrowings, financing costs and operating
expenses until some time after the commencement of commercial operations.

In an effort to ensure that sufficient quantities of hand-held phones and
pagers are available for distribution in advance of the commencement of
commercial operations, Iridium intends to enter into standby commitments with
Motorola and Kyocera Corporation to purchase an aggregate of up to $400 million
in subscriber equipment (the "Standby Equipment Purchase Commitments"). These
Commitments would be triggered on or after January 1, 1999, but only to the
extent such subscriber equipment is not purchased by and shipped to gateway
operators or service providers prior to January 1, 1999.

Iridium's interest expense will increase significantly as a result of its
financing plan. Prior to the receipt of revenues from commercial operations,
Iridium expects to service its interest expense out of available cash and
borrowings. From approximately the time of commencement of commercial
operations through approximately year-end 1999 (the last year in which Iridium
projects negative cash flow and a net increase in year-end outstanding
borrowings) Iridium expects to service its interest expense partly from
available cash and bank facilities and partly from revenues from operations.
During commercialization, Iridium will be required to make payments to Motorola
under the Operations and Maintenance Contract. After December 31, 1999,
Iridium's obligations related to the Operations and Maintenance Contract, funds
needed for working capital, capital expenditures and debt service are
anticipated to be funded through operations.

SOURCES OF FUNDING

As of March 31, 1998, Iridium had indirectly received $1.94 billion from
equity investments in the Parent, and has the right to receive approximately
$49 million due from South Pacific Iridium Holdings Limited pursuant to the
terms of a definitive purchase agreement. Iridium's indebtedness for borrowed
money equaled approximately $2.0 billion, including $1.1 billion in aggregate
principal amount of Senior Notes (as defined), approximately $285 million of
borrowings under the $450 million Guaranteed Bank Facility (as defined) and
approximately $350 million of borrowings under the Secured Bank Facility (as
defined).

On May 13, 1998, Iridium and Iridium Capital Corporation completed an
offering of $350 million principal amount of 10 7/8% Senior Notes due 2005,
Series D ("Series D Notes"). The Series D Notes are guaranteed by Roaming, IP
and Facilities. The net proceeds received were approximately $342 million.
Interest on the Series D Notes is payable in cash semi-annually on January 15
and July 15 of each year, commencing on July 15, 1998. The Series D Notes are
redeemable at the option of Iridium, in whole or in part, at any time on or
after July 15, 2002. The Series D Notes mature on July 15, 2005.

As of March 31, 1998, Iridium had drawn $285 million under a $450 million
unsecured borrowing facility with a syndicate of banks (the "Guaranteed Bank
Facility"). Borrowings under the Guaranteed Bank Facility are guaranteed by
Motorola (the "Motorola Guarantee"). A portion of the proceeds of the Senior
Notes will be used to permanently reduce the Guaranteed Bank Facility from $750
million to $450 million. On May 13, 1998, in connection with the issuance of
the Series D Notes, the commitment of the bank lenders under the Guaranteed
Bank Facility was further permanently reduced from $450 million to $275
million. Depending on market conditions, Iridium may make additional senior
note offerings in order to further reduce the Guaranteed Bank Facility or for
other purposes. The Guaranteed Bank Facility matures on June 30, 1999.

On December 18, 1997, pursuant to the Asset Drop-Down Transaction,
substantially all of the assets and liabilities of Parent were transferred to
Iridium, including, without limitation, the Senior Notes and the Guaranteed
Bank Facility, and the Parent was released from such liabilities.

24
25
Pursuant to the Memorandum of Understanding, dated May 11, 1998, among
Iridium, Parent and Motorola (the "Motorola MOU"), in addition to the Motorola
Guarantee, Motorola has conditionally agreed that it will (i) guarantee up to
$350 million of additional indebtedness (including principal and interest)
under the Guaranteed Bank Facility or another credit facility on identical
terms (the "Motorola Additional Guarantee"), provided that borrowings under
such additional indebtedness are made on or prior to February 28, 1999, (ii)
guarantee up to approximately $175 million of additional indebtedness
(including principal and interest) under the Guaranteed Bank Facility or a
credit agreement having the identical terms as the Guaranteed Bank Facility
(other than maturity) to be used by Iridium only for payments to Motorola in
respect of Motorola Standby Commitments and amounts overdue to Motorola (the
"Motorola Equipment Guarantee"). Borrowings under the Guaranteed Bank Facility
mature on June 30, 1999. Pursuant to the Motorola MOU, Motorola has agreed to
extend the Motorola Guarantee (including the Motorola Additional Guarantee, if
committed) until after July 15, 2005, if the Guaranteed Bank Facility is so
extended. Iridium believes it would be able to amend the Guaranteed Bank
Facility to increase its amount to the extent of the Motorola Additional
Guarantee and to extend its maturity until after July 15, 2005, if it so
requests. There can be no assurance, however, that the bank lenders will agree
to increase the amount of the Guaranteed Bank Facility or to extend the term of
the Guaranteed Bank Facility, if so requested by Iridium, or that any such
other identical credit facility would be available.

Iridium has entered into a Credit Agreement with Chase Securities Inc., The
Chase Manhattan Bank, Barclays Bank PLC and Barclays Capital, the investment
banking division of Barclays Bank PLC, and a syndicate of lenders (the "Secured
Lenders") for a senior bank facility in a principal amount of $1.0 billion (the
"Secured Bank Facility"). As of March 31, 1998, Iridium had drawn $350 million
under this Secured Bank Facility. The availability of the Secured Bank Facility
is subject to significant conditions, including technical conditions relating
to the Iridium System, conditions relating to regulatory approvals and
conditions relating to other financing sources. The final $250 million of the
Secured Bank Facility is not available prior to the defined commercial
activation date. The Secured Bank Facility is secured by substantially all of
Iridium's assets. The Secured Bank Facility is further secured by the Reserve
Capital Call (as defined) of the Parent and all of the membership interests in
Iridium. In addition, each of Iridium's subsidiaries has guaranteed Iridium's
obligations thereunder. The Reserve Capital Call is the contractual commitment
by 17 of Parent's investors to purchase up to 18,206,550 Class 1 Interests at
$13.33 per interest (an aggregate of approximately $243 million).

Borrowings under the Secured Bank Facility mature on September 30, 1998,
subject to Iridium's right to extend such maturity until up to June 30, 1999,
if Iridium can demonstrate by July 1, 1998 that it has sufficient available or
committed funds for its budgeted project costs through such extended maturity.
Assuming approximately $270 million of borrowings under the Guaranteed Bank
Facility and $630 million of borrowings under the Secured Bank Facility,
Iridium expects to have sufficient cash to meet its anticipated funding
requirements through September 23, 1998, the date on which Iridium expects to
commence commercial operations. Iridium expects to seek other senior secured
bank financing in order to meet its expected funding requirements through at
least year-end 1999, the last year in which Iridium projects negative cash flow
and a net increase in year end borrowing.

Additional financing may also need to be obtained through the issuance of
equity or debt securities in the public or private markets. The availability
and terms of any such financing are uncertain and are dependent, in part, on
market conditions existing at the time of any proposed financing. Iridium's
estimated funding requirements will increase, perhaps substantially, in the
event of unexpected cost increases or schedule delays. Additional equity
financing, if pursued, may be raised either privately from strategic or
financial investors, or through additional public offerings. Depending on
market conditions, Iridium may make additional senior note offerings.

In the event Iridium is required to make significant purchases pursuant to
the Standby Purchase Commitments, it expects to use borrowings guaranteed by
the Motorola Equipment Guarantee (in respect of purchases from Motorola) and
the Kyocera Equipment Guarantee (in respect of purchases from Kyocera).
Pursuant to the Motorola Equipment Guarantee, Motorola would guarantee up to
approximately $175 million of additional indebtedness in respect of equipment
purchases from Motorola and, pursuant to the Kyocera Equipment Guarantee,
Kyocera would guarantee up to approximately $122.5 million of additional
indebtedness in respect of equipment purchases from Kyocera. Accordingly, the
Standby Equipment Purchase Commitments exceed the aggregate amounts of such
Equipment Guarantees by

25
26
approximately $102.5 million. If Iridium's obligations under the Standby
Equipment Purchase Commitments exceed the amounts of the Equipment Guarantees,
there can be no assurance that Iridium will have sufficient funds, or be able
to secure sufficient financing, to satisfy its equipment purchase obligations.

As a result of Iridium's outstanding debt and the expected incurrence of
significant additional indebtedness required to meet its capital requirements,
Iridium will have substantial indebtedness. The debt instruments governing
Iridium's indebtedness are likely to contain restrictions on, among other
things, the incurrence of indebtedness, the granting of liens and the payment
of cash dividends. Iridium's ability to meet all of its debt service
obligations when due will require it to generate significant cash flow from
operations or, if necessary, make additional borrowings to refinance its
outstanding indebtedness. No assurance can be made that Iridium will be able to
generate sufficient cash flow to meet its debt service obligations or that it
will be able to refinance indebtedness. In addition, the debt instruments
governing future indebtedness are likely to contain restrictions on, among
other things, the incurrence of indebtedness.

OPERATIONS

Iridium is a development stage company and, as such, will not generate any
revenues from operations until the Iridium System is constructed and deployed,
and commercial operations commence, which is currently anticipated to be in
September 1998. From the commencement of development (June 1991) through March
31, 1998, Iridium had expended approximately $3.66 billion on the development,
construction and commercialization of the Iridium System, representing 81% of
Iridium's estimate of its cash funding requirements through the anticipated
commencement of commercial operations (September 23, 1998) and 67% of Iridium's
estimate of its cash funding requirements (net of assumed revenues following
commencement of commercial operations) through year-end 1999, the last year in
which Iridium projects negative cash flow and a net increase in year-end
borrowings.

As of March 31, 1998, Iridium's only source of income was interest income on
the cash and investment balances from the proceeds of equity commitments in
Parent, which amounted to approximately $19.7 million from July 29, 1993 (the
"Initial Capital Contribution Date") to March 31, 1998. During the same period,
Iridium recorded a net loss of approximately $616 million. In addition, during
the periods ended December 31, 1991 and 1992, and the period from January 1,
1993 to the Initial Capital Contribution Date, aggregate costs of $14.8 million
were incurred by Motorola. Such costs were paid by Parent to Motorola pursuant
to a reimbursement agreement.

As a development stage company, Iridium has incurred losses since inception
of its predecessor companies and will continue to do so for the foreseeable
future. Iridium's ability to become profitable and generate positive cash flow
is dependent on the successful and timely commencement of the operation of the
Iridium System, wide subscriber acceptance and numerous other factors.

CAPITALIZATION OF COSTS

All payments by Iridium under the Space System Contract are being
capitalized. These capitalized costs are then depreciated over the five-year
estimated life of the satellites. Depreciation expense is realized on a
satellite-by-satellite basis, commencing with the delivery of each satellite to
its mission orbit. Depreciation related to the ground control stations
commences with the placement in service of each such station. Losses from
satellite failures for which Iridium has financial responsibility under its
contractual arrangements with Motorola are recognized currently. Motorola bears
the risk of loss for launch failures and satellite failures before a satellite
is placed into service. Iridium has obtained a satellite insurance policy to
cover certain costs associated with the loss of a satellite. Capitalized
amounts under the Space System Contract and the Terrestrial Network Development
Contract aggregated approximately $3.2 billion through March 31, 1998. In
addition, costs incurred in connection with the issuance by Parent of Class 1
Interests are reflected as a reduction of Parent's additional paid-in capital
and Iridium's debt issuance costs are deferred and amortized over the term of
the related indebtedness. Payment of these costs and charges has resulted in
significant negative operating cash flow. Certain interest costs also will be
capitalized through the date of commencement of commercial operations.

26
27
A portion of the payments made under the Operations and Maintenance Contract
will be capitalized and depreciated. The amount so capitalized will be
determined depending upon the number of replacement satellites put into
service. Any costs under the Operations and Maintenance Contract not
capitalized will be expensed.

OPERATING EXPENSES

For the period from the Initial Capital Contribution Date through March 31,
1998, total operating expenses were approximately $588 million. During the
period prior to the Initial Capital Contribution Date, total accumulated
expenditures of approximately $14.8 million were incurred, primarily to
reimburse Motorola for expenses associated with operating Iridium during the
period from its incorporation in 1991 through the Initial Capital Contribution
Date. Iridium expects a substantial increase in future operating expenditures
relating to sales, marketing and other costs associated with commercialization.

INTEREST EXPENSE

Iridium expects to finance a significant portion of its capital requirements
through borrowings. As a result of these borrowings, Iridium will have
significant interest costs. Interest costs are being capitalized while the
Iridium System is under construction and will be depreciated thereafter. This
has resulted in all interest costs being capitalized during 1995, 1996, and
1997. For the three months ended March 31, 1998, $79,447,000 of interest
expense was incurred. Interest expensed for the three months ended March 31,
1998 was $40,000,000 with the remaining interest capitalized to the system
under construction. It is likely that a meaningful portion of interest cost
will be expensed in 1998 and all interest cost will be expensed beginning in
1999. Some portion of interest expense will not be paid in cash, including the
interest expense related to Iridium's 14 1/2% Senior Subordinated Notes through
March 1, 2001. Such non-cash interest will be accrued and such accrual will
increase outstanding indebtedness on Iridium's and Parent's consolidated
balance sheets.

INCOME TAXES

Each of Parent and Iridium reports its income as a partnership for United
States federal income tax purposes and accordingly, is not expected to be
directly subject to U. S. federal income tax. Iridium may, however, be subject
to tax in some state, local or foreign jurisdictions on portions of its income.
IWCL is taxed directly.

27
28
PART ll

ITEM 1. LEGAL PROCEEDINGS

Not Applicable

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not Applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable

ITEM 5. OTHER INFORMATION

Not Applicable

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit No. Description
----------- -----------

11.1 Computation of Loss Per Class A Common Share

11.2 Computation of Loss per Class 1 Interest

99.1 Certain of the Factors Which May Affect Forward
Looking Statements

(b) Reports on Form 8-K

Not Applicable

28
29
IRIDIUM WORLD COMMUNICATIONS LTD.

----------

IRIDIUM LLC

(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

----------

IRIDIUM OPERATING LLC

(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)

(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

----------

IRIDIUM CAPITAL CORPORATION

IRIDIUM IP LLC

IRIDIUM ROAMING LLC

----------
SIGNATURES

----------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on each of their behalf
by the undersigned thereunto duly authorized:

IRIDIUM WORLD COMMUNICATIONS LTD. IRIDIUM WORLD COMMUNICATIONS LTD.

/s/ Edward F. Staiano /s/ Roy T. Grant
--------------------- ----------------
Dr. Edward F. Staiano Roy T. Grant
Chief Executive Officer Chief Financial Officer

IRIDIUM LLC IRIDIUM LLC

/s/ Edward F. Staiano /s/ Roy T. Grant
--------------------- ----------------
Dr. Edward F. Staiano Roy T. Grant
Chief Executive Officer Chief Financial Officer

IRIDIUM OPERATING LLC IRIDIUM OPERATING LLC

/s/ Edward F. Staiano /s/ Roy T. Grant
--------------------- ----------------
Dr. Edward F. Staiano Roy T. Grant
Chief Executive Officer Chief Financial Officer

IRIDIUM CAPITAL CORPORATION IRIDIUM CAPITAL CORPORATION

/s/ Edward F. Staiano /s/ Roy T. Grant
--------------------- ----------------
Dr. Edward F. Staiano Roy T. Grant
Chief Executive Officer Chief Financial Officer

29
30
IRIDIUM WORLD COMMUNICATIONS LTD.

-----------
IRIDIUM LLC

(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

-----------
IRIDIUM OPERATING LLC

(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)

(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

-----------
IRIDIUM CAPITAL CORPORATION

IRIDIUM IP LLC

IRIDIUM ROAMING LLC

-----------
SIGNATURES

-----------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on each of their behalf
by the undersigned thereunto duly authorized:

IRIDIUM IP LLC IRIDIUM IP LLC

/s/ Edward F. Staiano /s/ Roy T. Grant
--------------------- ----------------
Dr. Edward F. Staiano Roy T. Grant
Acting Chief Executive Officer Acting Chief Financial Officer

IRIDIUM ROAMING LLC IRIDIUM ROAMING LLC

/s/ Edward F. Staiano /s/ Roy T. Grant
--------------------- ----------------
Dr. Edward F. Staiano Roy T. Grant
Acting Chief Executive Officer Acting Chief Financial Officer

Date: May 14, 1998

30
31
INDEX TO EXHIBITS

SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------ ---------------------- ----

11.1 Computation of Loss Per Class A Common Share 32

11.2 Computation of Loss per Class 1 Interest 33

99.1 Certain of the Factors Which May Affect Forward
Looking Statements 34

27 Financial Data Schedule 42