IRIDIUM LLC, 10-Q, 1997-11-07

IRIDIUM LLC
10-Q, 1997-11-07
RADIOTELEPHONE COMMUNICATIONS

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<PAGE> 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 SEPTEMBER 30, 1997

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

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

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)

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

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)

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

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)

---------------
<PAGE> 2
IRIDIUM IP LLC
(Exact name of Registrant as specified in its charter)

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

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)

<TABLE>
<S> <C> <C>
DELAWARE 333-31741-02 52-2048734
(State or other jurisdiction (Commission file Number) (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>

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 No X*
--- ---

* Iridium Capital Corporation, Iridium IP LLC and Iridium Roaming LLC became
subject to the filing requirements of Section 15 (d) on September 8, 1997.

SHARES OUTSTANDING
CLASS AT OCTOBER 31, 1997
-------------------------------- -----------------------
Common Stock, Class A
$0.01 par value per share 12,000,000
<PAGE> 3
IRIDIUM WORLD COMMUNICATIONS LTD.

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

IRIDIUM LLC

(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

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

IRIDIUM CAPITAL CORPORATION

IRIDIUM IP LLC

IRIDIUM ROAMING LLC

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

INDEX TO FORM 10-Q

---------------
<TABLE>
<CAPTION>
PAGE
NUMBER
----------------
<S> <C> <C>
PART I FINANCIAL INFORMATION

ITEM 1 Financial Statements

IRIDIUM WORLD COMMUNICATIONS LTD.

Condensed Balance Sheets
September 30, 1997 and December 31, 1996 5

Unaudited Condensed Statements of Loss
For the three and nine months ended September 30, 1997 6

Unaudited Condensed Statement of Cash Flows
For the nine months ended September 30, 1997 7

Notes to Unaudited Condensed Financial Statements 8

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

Condensed Consolidated Balance Sheets
September 30, 1997 and December 31, 1996 9

Unaudited Condensed Consolidated Statements of Loss
For the three months ended September 30, 1997 and 1996
and the nine months ended September 30, 1997 and 1996 10

Unaudited Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 1997 and 1996 11

Notes to Unaudited Condensed Consolidated Financial Statements
12
</TABLE>

3
<PAGE> 4
IRIDIUM WORLD COMMUNICATIONS LTD.

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

IRIDIUM LLC

(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

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

IRIDIUM CAPITAL CORPORATION

IRIDIUM IP LLC

IRIDIUM ROAMING LLC

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

INDEX TO FORM 10-Q

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

<TABLE>
<CAPTION>
PAGE
NUMBER
--------------
<S> <C>
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 16

PART II OTHER INFORMATION

ITEM 1 Legal Proceedings 21

ITEM 2 Changes in Securities and Use of Proceeds 21

ITEM 3 Defaults upon Senior Securities 21

ITEM 4 Submission of Matters to a Vote of Security Holders 21

ITEM 5 Other Information 21

ITEM 6 Exhibits and Reports on Form 8-K 21

SIGNATURES 22

EXHIBIT INDEX 23
</TABLE>

4
<PAGE> 5
IRIDIUM WORLD COMMUNICATIONS LTD.

CONDENSED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1997
1996 (UNAUDITED)
---------- -----------
ASSETS
<S> <C> <C>
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ -
Investment in Iridium LLC . . . . . . . . . . . . . . . . . . . . . . . . . . - 234,674
--------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 234,674
========= ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ -
Stockholders' equity:
Class B Common stock, non-voting, par value $0.01; 2,500,000 shares
authorized; none issued or outstanding . . . . . . . . . . . . . . . . - -
Class A Common stock, voting, par value $0.01; 50,000,000 shares
authorized; 1,200,000 and 12,000,000 issued and outstanding . . . . . . 12 120
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . - 242,593
Subscription receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) -
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . - (8,039)
--------- ----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . - 234,674
--------- ----------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . $ - $ 234,674
========= ==========
</TABLE>

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

5
<PAGE> 6
IRIDIUM WORLD COMMUNICATIONS LTD.

UNAUDITED CONDENSED STATEMENTS OF LOSS
(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
------------------ ------------------
<S> <C> <C>
Equity in loss of Iridium LLC . . . . . . . . . . . . . . . . . . . . . . $ 7,260 $ 8,039
------------ -----------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,260 $ 8,039
============ -----------
Net loss per Class A Common share . . . . . . . . . . . . . . . . . . . . $ 0.61 $ 1.62
============ ===========
Weighted average shares used in computing
net loss per Class A Common share . . . . . . . . . . . . . . . . . . 12,000,000 4,967,033
=========== ===========
</TABLE>

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

6
<PAGE> 7
IRIDIUM WORLD COMMUNICATIONS LTD.

UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, 1997

<TABLE>
<S> <C>
Cash Flows From Operating Activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (8,039)
Adjustment to reconcile net loss to net
cash used in operating activities:
Equity in loss of Iridium LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,039
----------
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
----------

Cash Flows From Investing Activities:
Investment in Iridium LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (242,713)
--------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (242,713)
--------

Cash Flows From Financing Activities:
Net proceeds from equity offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,600
Proceeds from Warrants issued in conjunction with Iridium LLC Senior Notes . . . . . . . . . . 17,113
Proceeds from Class A Common Stock subscribed . . . . . . . . . . . . . . . . . . . . . . . . . 12
Retirement of Class A Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12)
----------
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242,713
----------

Increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . -
----------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -
==========
</TABLE>

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

7
<PAGE> 8
IRIDIUM WORLD COMMUNICATIONS LTD.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1. 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 Iridium World Communications Ltd. ("IWCL") as of
September 30, 1997 and its results of operations for the three and nine month
periods then ended, and its cash flows for the nine 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 statement and footnotes thereto included
in the registration statement on Form S-1 (333-23419, 23419-01), dated June 9,
1997.

Since its inception on December 12, 1996 through September 30, 1997,
IWCL has not entered into any operating transactions or incurred any expenses.
The results of operations for the three and nine months ended September 30,
1997 are not necessarily indicative of the results of operations expected in
the future.

In March and 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. Pursuant to the 1997 Subscription Agreement between IWCL
and Iridium LLC ("Iridium"), approximately $225 million in net proceeds from
the Offering were invested in Iridium Class 1 Membership Interests, at which
time the outstanding shares of Class A Common Stock held by Iridium were
retired, and IWCL became a member of Iridium.

2. NEW ACCOUNTING PRONOUNCEMENT

In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" ("Statement 128"). Statement 128
supersedes Accounting Principles Board Opinion No. 15, "Earnings per Share"
("APB 15") and its related interpretations, and promulgates new accounting
standards for the computation and manner of presentation of earnings (loss) per
share data. IWCL is required to adopt the provisions of Statement 128 for the
year ending December 31, 1997. Earlier application is not permitted; however,
upon adoption of Statement 128 IWCL will be required to restate previously
reported annual and interim earnings (loss) per share data in accordance with
the provisions of Statement 128. IWCL does not believe that the adoption of
Statement 128 will have a material impact on the computation or manner of
presentation of its earnings (loss) per share data as presented under APB 15.

3. STOCKHOLDERS' EQUITY

On July 16,1997, Iridium and Iridium Capital Corporation, a wholly
owned subsidiary of Iridium, completed an offering (the "High Yield Offering")
of (i) 300,000 units, each consisting of $1,000 principal amount of 13% Senior
Notes due 2005, Series A ("Series A Notes"), and one IWCL Warrant, representing
the right to purchase 5.2 shares of Class A Common Stock of IWCL and (ii) $500
million aggregate principal amount of 14% Senior Notes due 2005, Series B
("Series B Notes"). The Series A Notes and Series B Notes are guaranteed by
Iridium Roaming LLC and Iridium IP LLC. IWCL is not an obligor of the Series A
Notes or Series B Notes. The IWCL Warrants represent, in aggregate, the right
to purchase 1,560,000 shares of Class A Common Stock of IWCL. Approximately
$17,113,000 of the proceeds of the High Yield Offering was allocated to the
purchase price of the IWCL Warrants. The exercise price of each IWCL Warrant
is $20.90 per share. The IWCL Warrants are exercisable at anytime on or after
one year from the date of original issuance and expire on July 15, 2005.
Concurrent with the issuance of the IWCL Warrants in the High Yield Offering,
Iridium issued to IWCL 1,560,000 LLC Interest Warrants, each exerciseable for
one Class 1 Interest at an exercise price of $20.90 per LLC Interest Warrant.
The LLC Interest Warrants are designed to be exercised upon the exercise of the
IWCL Warrants.

8
<PAGE> 9
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT MEMBER INTEREST DATA)

<TABLE>
<CAPTION>
SEPTEMBER 30,
ASSETS DECEMBER 31, 1997
1996 (UNAUDITED)
------------- -------------
<S> <C> <C>
Current assets :
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 1,889 $ 9,189
Due from affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,476 13,618
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . 7,154 14,853
---------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . 12,519 37,660
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . 2,065 1,008,450
System under construction . . . . . . . . . . . . . . . . . . . . . . . . . 2,376,884 2,003,472
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,613 141,303
---------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,434,081 $3,190,885
========== ==========

LIABILITIES AND MEMBERS' EQUITY
Current liabilities :
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . $ 17,937 $ 49,614
Accounts payable to Member . . . . . . . . . . . . . . . . . . . . . . . 100,563 130,258
Guaranteed bank facility, current portion . . . . . . . . . . . . . . . . - 235,000
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 118,500 414,872
Guaranteed bank facility . . . . . . . . . . . . . . . . . . . . . . . . . 505,000 -
Long term debt due to Members . . . . . . . . . . . . . . . . . . . . . . . 230,904 262,035
Senior Notes, Series A and Series B . . . . . . . . . . . . . . . . . . . . - 753,478
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,648 6,972
---------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 862,052 1,437,357
---------- ----------
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 interest issued and outstanding . . . . . . . - -
Series A, redeemable, convertible, 46,977 and 38,511
interests issued and outstanding; liquidation value of $38,511 . . . . 46,977 38,511
Series B, redeemable, 1 interest issued and outstanding . . . . . . . . - -
Series C, redeemable, 75 interests issued and outstanding . . . . . . . - -
Class 1 Interests, authorized 225,000,000 interests, 120,836,025
and 141,219,180 interests issued and outstanding . . . . . . . . . . . 1,659,625 2,019,107
Deferred Class 1 Interests compensation . . . . . . . . . . . . . . . . . - (1,568)
Deficit accumulated during the development stage . . . . . . . . . . . . (133,840) (301,789)
Adjustment for minimum pension liability . . . . . . . . . . . . . . . . (733) (733)
---------- ----------
Total Members' equity . . . . . . . . . . . . . . . . . . . . . . . . . 1,572,029 1,753,528
---------- ----------
Total liabilities and Members' equity . . . . . . . . . . . . . . . . . $2,434,081 $3,190,885
========== ==========
</TABLE>

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

9
<PAGE> 10
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(IN THOUSANDS EXCEPT MEMBER INTEREST DATA)

THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------

1996 1997 1996 1997
-------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
Operating expenses
Sales, general and administrative. . . . . . . $ 19,466 $ 39,061 $ 37,911 $ 122,926
Depreciation and amortization. . . . . . . . . 155 45,936 441 46,539
----------- ----------- ----------- -----------
Total operating expenses . . . . . . . . . . 19,621 84,997 38,352 169,465
Other income
Interest income, net . . . . . . . . . . . . . 502 902 2,217 1,516
----------- ----------- ----------- -----------
Loss before provision for income taxes . . . . . 19,119 84,095 36,135 167,949
Provision for income taxes . . . . . . . . . . . 5,113 - 5,600 -
----------- ----------- ----------- -----------
Net loss . . . . . . . . . . . . . . . . . . . . $ 24,232 $ 84,095 $ 41,735 $ 167,949
=========== =========== =========== ===========
Preferred dividend requirement . . . . . . . . . 1,580 1,317 2,419 4,924
----------- ----------- ----------- -----------
Net loss applicable to Class 1 Interests . . . . $ 25,812 $ 85,412 $ 44,154 $ 172,873
=========== =========== =========== ===========
Net loss per Class 1 Interest. . . . . . . . . . $ 0.21 $ 0.60 $ 0.37 $ 1.33
=========== =========== =========== ===========
Weighted average interests used in
computing net loss per Class 1 Interest. . . . 120,821,421 141,219,180 119,523,754 130,065,304
=========== =========== =========== ===========

<CAPTION>
PERIOD
FROM
JUNE 14, 1991
(INCEPTION)
THROUGH
SEPTEMBER 30,
1997
--------------
<S> <C>
Operating expenses
Sales, general and administrative. . . . . . . $ 258,753
Depreciation and amortization. . . . . . . . . 48,844
---------
Total operating expenses . . . . . . . . . . 307,597
Other income
Interest income, net . . . . . . . . . . . . . 13,779
---------
Loss before provision for income taxes . . . . . 293,818
Provision for income taxes . . . . . . . . . . . 7,971
---------
Net loss . . . . . . . . . . . . . . . . . . . . $ 301,789
=========
Preferred dividend requirement . . . . . . . . .

Net loss applicable to Class 1 Interests . . . .

Net loss per Class 1 Interest. . . . . . . . . .

Weighted average interests used in
computing net loss per Class 1 Interest. . . .

</TABLE>
The accompanying notes are an integral part of these unaudited condensed
financial statements

10
<PAGE> 11
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
JUNE 14, 1991
(INCEPTION)
NINE MONTHS ENDED SEPTEMBER 30, THROUGH
------------------------------- SEPTEMBER 30,
1996 1997 1997
--------------- ------------- -------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (41,735) $ (167,949) $ (301,789)
Adjustments to reconcile net loss to net cash
used in operating activities -
Depreciation and amortization . . . . . . . . . . . . . . . . 441 46,539 48,844
Employee Class 1 Interests compensation . . . . . . . . . . . - 38 38
Expense recognized for warrants issued in
connection with debt guarantee. . . . . . . . . . . . . . . 7,793 48,631 74,350
Changes in assets and liabilities:
Increase in prepaids and other current assets . . . . . . . (414) (7,699) (14,853)
Increase in due from affiliates . . . . . . . . . . . . . . (259) (10,142) (13,618)
Increase in other assets. . . . . . . . . . . . . . . . . . (7,031) (36,825) (53,198)
Increase in accounts payable and accrued expenses . . . . . 15,261 33,232 51,169
(Decrease) increase in other liabilities. . . . . . . . . . 12,878 (676) 6,802
------------ ------------ ------------
Net cash used in operating activities . . . . . . . . . . (13,066) (94,851) (202,255)
------------ ------------ ------------
Cash Flows From Investing Activities:
Purchases of property and equipment . . . . . . . . . . . . . . (1,054) (4,189) (8,559)
Additions to system under construction. . . . . . . . . . . . . (508,173) (614,045) (2,862,802)
------------ ------------ ------------
Net cash used in investing activities . . . . . . . . . . (509,227) (618,234) (2,871,361)
------------ ------------ ------------
Cash Flows From Financing Activities:
Net proceeds from issuance of Class 1 and 2 interests . . . . . 183,229 283,666 1,932,794
Net proceeds from issuance of senior notes
and warrants. . . . . . . . . . . . . . . . . . . . . . . . 238,453 745,939 984,392
Borrowings under bank line of credit. . . . . . . . . . . . . . 100,402 410,000 915,000
Payments under bank line of credit. . . . . . . . . . . . . . . - (680,000) (680,000)
Deferred financing costs. . . . . . . . . . . . . . . . . . . . (22,173) (39,220) (69,381)
------------ ------------ ------------
Net cash provided by financing activities . . . . . . . . 499,911 720,385 3,082,805
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents. . . . . . . . . (22,382) 7,300 9,189
Cash and Cash Equivalents, beginning of period. . . . . . . . . . 51,332 1,889 -
------------ ------------ ------------
Cash and Cash Equivalents, end of period. . . . . . . . . . . . . $ 28,950 $ 9,189 $ 9,189
============ ============ ============
</TABLE>

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

11
<PAGE> 12
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

Iridium LLC ("Iridium") is devoting its present efforts to developing
and commercializing a global wireless telephony 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.

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 September 30, 1997, and the results
of their operations for the three and nine month periods ended September 30,
1997 and 1996, and the period from June 14, 1991 (inception) through September
30, 1997, and their cash flows for the nine month period ended September 30,
1997 and 1996, and the period from June 14, 1991 (inception) through September
30, 1997. These condensed consolidated financial statements are unaudited, and
do not include all related footnote disclosures. The results of operations for
the three and nine months ended September 30, 1997 are not necessarily
indicative of the results of operations expected in the future, although the
Company will continue to be a development stage limited liability company and
anticipates a net loss for the year. These financial statements should be read
in conjunction with Iridium's audited consolidated financial statements and
footnotes thereto included in the registration statement on Form S-1
(333-23419, 23419-01), dated June 9, 1997.

3. ACCOUNTING FOR SATELLITES LOST AT LAUNCH OR FAILING IN ORBIT

The costs of constructing and placing satellites into service are
capitalized. 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.

4. MEMBERS' EQUITY

On April 16, 1997, the Limited Liability Company Agreement of Iridium
was amended to increase the authorized number of Class 1 Interests from
3,000,000 to 225,000,000. On May 9, 1997, Iridium effected a 75 for 1
subdivision of its Class 1 Membership Interests whereby each existing Class 1
Interest was subdivided into 75 Class 1 Interests. All interest and per
interest data appearing in the unaudited condensed consolidated financial
statements and notes thereto have been retroactively adjusted for the
subdivision.

On May 9, 1997, Iridium entered into a definitive agreement with South
Pacific Iridium Holdings Limited ("SPI"), an affiliate of P.T. Bakrie
Communications Corporation ("Bakrie"), pursuant to which SPI acquired from
Iridium 7,500,000 Class 1 Interests at $13.33 per interest. The transaction
closed on May 30, 1997 with 40% of the total purchase price paid on that date
and the remainder due on or before May 1998. Through September 30, 1997,
Iridium has received an aggregate of $59.2 million from SPI in satisfaction of
the commitment.

On June 13, 1997, Iridium World Communications Ltd. ("IWCL"), a
wholly-owned subsidiary of Iridium as of that date, consummated an initial
public offering (the "Offering") of 12,000,000 shares of its Class A Common
Stock which resulted in proceeds of approximately $225 million to IWCL
(expenses of the offering were paid by Iridium). Pursuant to the 1997
Subscription Agreement between Iridium and IWCL, such proceeds were used to
purchase 12,000,000 Class 1 Interests in Iridium. Upon consummation of the
Offering, all of the outstanding shares of IWCL held by Iridium were retired,
and IWCL became a member of Iridium.

12
<PAGE> 13
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Iridium declared approximately $1,317,000 and $1,580,000 in-kind
dividends to holders of Series A Class 2 Membership Interests during the three
month periods ended September 30, 1997 and 1996, respectively, and $4,924,000
and $2,419,000 for the nine month periods ended September 30, 1997 and 1996,
respectively.

5. SUPPLEMENTAL CASH FLOW INFORMATION

During the nine months ended September 30, 1997 and 1996, $80,970,000
and $14,934,000, respectively, of interest expense was incurred and capitalized
to the system under construction. Interest paid was $24,344,000 during the
nine months ended September 30, 1997, and no amounts were paid for interest
during the nine months ended September 30, 1996.

There were no income taxes paid during the nine months ended September
30, 1997, and the amount paid for income taxes was $6,192,000 during the nine
months ended September 30, 1996.

6. TRANSACTIONS WITH MEMBER

TERRESTRIAL NETWORK DEVELOPMENT CONTRACT

As a result of technological developments, changes in the desired
product mix and features of the IRIDIUM services, the addition of enhanced
system capabilities, and scheduling adjustments, Iridium entered into an
amendment to the Terrestrial Network Development Contract ("TNDC") with
Motorola, Inc. ("Motorola"), effective July 15, 1997. Aggregate payments under
the TNDC, as so amended, are expected to be approximately $284 million.

GUARANTEED BANK FACILITY

In accordance with the Agreement Regarding Guarantee between Iridium
and Motorola, pursuant to which Motorola guaranteed Iridium's obligations under
the Guaranteed Bank Facility, an additional 56,416 warrants to purchase
4,231,200 Class 1 Interests were earned by Motorola during the nine months
ended September 30,1997. Iridium recognized $48,631,000 as expense during the
nine months ended September 30, 1997 in connection with the warrants earned by
Motorola.

On July 21, 1997, Iridium permanently reduced the commitment of the
bank lenders under the Guaranteed Bank Facility from $750 million to $655
million. On October 22, 1997, the commitment of the bank lenders under the
Guaranteed Bank Facility was further permanently reduced from $655 million to
$450 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 August 1998 is 110,085 warrants to purchase approximately 8,256,375
Class 1 Interests.

7. LONG TERM DEBT

13
<PAGE> 14
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

option of Iridium, in whole or in part, at any time on or after July 15, 2002.
The Series A and Series B Notes mature on July 15, 2005. The IWCL Warrants
represent, in aggregate, the right to purchase 1,560,000 shares of Class A
Common Stock of IWCL. The exercise price of each IWCL Warrant is $20.90 per
share, exercisable at any time on or after one year from the date of original
issuance, and expires on July 15, 2005. Concurrent with the issuance of the
IWCL Warrants in the High Yield Offering, Iridium issued to IWCL 1,560,000 LLC
Interest Warrants, each exerciseable for one Class 1 Interest at an exercise
price of $20.90 per LLC Interest Warrant. The LLC Interest Warrants provide
that one LLC Interest Warrant must be exercised upon the exercise of each IWCL
Warrant. Approximately $17,113,000 of the proceeds of the High Yield Offering
was allocated to the purchase price of the Iridium Interest Warrants.

Iridium has received a commitment letter from Chase Securities Inc.,
The Chase Manhattan Bank, Barclays Bank PLC and BZW, the investment banking
division of Barclays Bank PLC, for a Secured Bank Facility in a principal
amount up to $750 million, to be secured by substantially all of Iridium's
assets and by the Reserve Capital Call, defined as the contractual commitment
by 17 of Iridium's investors to purchase up to 18,206,550 Class 1 Interests at
$13.33 per interest. Borrowings under the Secured Bank Facility would mature
on September 30, 1998, subject to Iridium's right to extend such maturity until
June 30, 1999 if it can demonstrate by July 1, 1998 that it has sufficient
available or committed financing for its approved project costs through
such extended maturity. The availability of the Secured Bank Facility is
subject to significant conditions, including the execution of satisfactory
definitive documentation, technical conditions relating to the IRIDIUM System,
conditions relating to regulatory approvals and conditions relating to other
financing sources.

8. NEW ACCOUNTING PRONOUNCEMENT

In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" ("Statement 128"). Statement 128
supersedes Accounting Principles Board Opinion No. 15, "Earnings per Share"
("APB 15") and its related interpretations, and promulgates new accounting
standards for the computation and manner of presentation of Iridium's loss per
Class 1 Interest data. Iridium is required to adopt the provisions of
Statement 128 for the year ending December 31, 1997. Earlier application is
not permitted; however, upon adoption of Statement 128, Iridium will be
required to restate previously reported annual and interim loss per Class 1
Interest data in accordance with the provisions of Statement 128. Iridium does
not believe that the adoption of Statement 128 will have a material impact on
the computation or manner of presentation of its loss per Class 1 Interest data
as currently or previously presented under APB 15.

In June 1997, the Financial Accounting Standards Board issued
Statement No. 130, "Reporting Comprehensive Income" ("Statement 130").
Statement 130 establishes standards for the reporting and display of
comprehensive income and its components in the financial statements. Iridium
is required to adopt the provisions of Statement 130 for the year ending
December 31, 1998. Earlier application is permitted; however, upon adoption of
Statement 130, Iridium will be required to reclassify previously reported
annual and interim financial statements. The disclosure of comprehensive
income in accordance with the provisions of Statement 130 will impact the
manner of presentation of its financial statements as currently and previously
reported.

9. SUBSEQUENT EVENT

On October 17, 1997, Iridium and Iridium Capital Corporation, a wholly
owned subsidiary of Iridium, completed an offering of $300 million principal
amount of 11 1/4% Senior Notes due 2005, Series C ("Series C Notes"). The
Series C Notes are guaranteed by Iridium Roaming LLC and Iridium IP LLC. The
net proceeds received were approximately $293 million. Interest on the Series
C Notes is payable in cash semi-annually on January 15th and July 15th of each
year,

14
<PAGE> 15
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

commencing on January 15, 1998. The Series C Notes are redeemable at the
option of Iridium, in whole or in part, at any time on or after July 15, 2002.
The Series C Notes mature on July 15, 2005.

10. IRIDIUM SUBSIDIARIES

Iridium's Series A Notes, Series B Notes and Series C Notes are
co-issued by Iridium Capital Corporation ("Capital") and are fully and
unconditionally guaranteed, jointly and severally, on a senior unsecured basis
by Iridium Roaming LLC and Iridium IP LLC (together with Capital, the "Iridium
Subsidiaries"). Each of the Iridium Subsidiaries is a wholly-owned subsidiary
of Iridium and, as of September 30, 1997, Iridium has no subsidiaries other
than the Iridium Subsidiaries. The following is summarized financial
information of the Iridium Subsidiaries as of September 30. 1997 and for the
period from inception of each Iridium Subsidiary through September 30, 1997.
Full financial statements of the Iridium Subsidiaries are not presented because
management believes they are not material to investors.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------
<S> <C>
Current assets . . . . . . . . . . . . . . $0
Total assets . . . . . . . . . . . . . . . 0
Current liabilities . . . . . . . . . . . . 0
Total liabilities . . . . . . . . . . . . . 0
</TABLE>

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
INCEPTION THROUGH
SEPTEMBER 30, 1997 (1)
----------------------
<S> <C>
Net revenues . . . . . . . . . . . . . . . $0
Cost of services . . . . . . . . . . . . . 0
Net loss . . . . . . . . . . . . . . . . . 0
</TABLE>
- -------------
(1) Capital was formed and capitalized by Iridium on June 16, 1997 (subscribed
capital of $100). Iridium Roaming LLC was formed by Iridium on June 15, 1997.
Iridium IP LLC was formed by Iridium on February 28, 1997.

15
<PAGE> 16

ITEM 2.

IRIDIUM WORLD COMMUNICATIONS LTD.
AND
IRIDIUM LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

IWCL is a member of Iridium and has no other business. IWCL's sole
assets are its Class 1 Interests in Iridium and its LLC Interest Warrants, and
IWCL's results of operations reflect its proportionate share of the results of
operations of Iridium on an equity accounting basis.

Iridium is currently devoting its entire efforts to establishing and
commercializing the IRIDIUM communications system (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. Each of Iridium Capital Corporation, Iridium Roaming LLC and
Iridium IP LLC is a wholly-owned subsidiary of Iridium. See IWCL's and
Iridium's financial statements and notes thereto included elsewhere in this
quarterly report.

FORWARD LOOKING INFORMATION

Iridium is a development stage enterprise. Accordingly, many
statements in this report are forward looking. Examples of such forward
looking statements include, but are not limited to, the statements concerning
Iridium's operations, funding needs, financial sources, schedule for
commencement of commercial operations, the estimate of the last year in which
Iridium will have negative cash flow and a net increase in year-end borrowings,
and future licensing and regulatory developments, as well as information
concerning expected characteristics of competing systems and expected actions
of third parties, including, but not limited to, systems contractors, equipment
suppliers, gateway operators, service providers and roaming partners. These
forward looking statements are based on a number of assumptions and are
inherently predictive and speculative. One or more of the assumptions
underlying such forward looking statements is likely to be incorrect.
Therefore, actual results may be materially different from those expressed or
implied by such statements.

Factors which may cause IWCL's or Iridium's results to differ
materially from those expressed or implied by such forward looking statements
include, but are not limited to, (i) Iridium's absence of current revenues,
highly leveraged capital structure and significant additional funding needs,
(ii) delays and cost overruns related to the construction and deployment of the
IRIDIUM System, (iii) technological risks related to the development and
implementation of the various components of the IRIDIUM System, (iv) customer
acceptance of Iridium's services, (v) satellite launch, operation and
maintenance risks, (vi) risks associated with the need to obtain operating
licenses in the numerous countries where Iridium assumes it will provide its
services, (vii) competition from satellite and terrestrial communications
services and (viii) Iridium's dependence on Motorola, Inc. ("Motorola") and its
other members for the construction and operation of the IRIDIUM System and the
distribution and marketing of Iridium's services. These factors, and other
factors that may materially affect Iridium's operations, are described in
greater detail in the Securities and Exchange Commission filings of IWCL and
Iridium, including Exhibit 99.1 to this report.

LIQUIDITY AND CAPITAL RESOURCES

Funding Requirements

Iridium will require substantial amounts of continued outside
financing to acquire and develop its assets and to commence operations. With
respect to the IRIDIUM System, Iridium and Motorola have entered into (i) the
Space System Contract for the design, development,

16
<PAGE> 17
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 through 1999. As a result of technological
developments, changes in the product mix of the IRIDIUM Service, and scheduling
adjustments, including the implementation of ICRS (Iridium Cellular Roaming
Service) into Iridium's service offerings, there have been, and Iridium
anticipates there will be, amendments and interpretations of the Space System
Contact, 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.

Through September 30, 1997, Iridium incurred expenditures totaling
$2.84 billion to Motorola under the Space System Contract in respect of
completed milestones and expenditures totaling $106 million under the
Terrestrial Network Development Contract. Based on current estimates and the
current planned schedule, Iridium's expected future cash requirements by year
under the contracts through December 31, 1999 are approximately as follows:

<TABLE>
<CAPTION>
Remainder of
1997 1998 1999
------------- ------------- -------------
(in millions)
<S> <C> <C> <C>
Space System Contract . . . . . . . . . . . . . . $145 $589 -
Terrestrial Network Development Contract . . . . 36 89 $ 63
Operations and Maintenance Contract . . . . . . . - 140 538
</TABLE>

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.
Iridium's interest expense will increase significantly as a result of its
financing plan. During commercialization, Iridium will be required to make
payments to Motorola under the Operations and Maintenance Contract. After
December 31, 1999 (the last year in which Iridium projects negative cash flow
and a net increase in year-end outstanding borrowings), Iridium expects that
its obligations relating to the Operations and Maintenance Contract and funds
needed for working capital, capital expenditures and debt service should be
funded through operations. Iridium anticipates cash funding requirements of
approximately $4.4 billion through September 1998, the month Iridium expects to
commence commercial operations, and $5.3 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 borrowing.

The foregoing information reflects Iridium's current estimate of its
funding requirements through year-end 1999. Actual amounts may be expected to
vary from such estimates for a

17
<PAGE> 18
variety of reasons, including unforeseen construction, integration or
regulatory delays or launch failures. See "- Forward Looking Information."

Sources of Funding

As of September 30, 1997, Iridium had equity investments of $1.982
billion, including approximately $224 million in net proceeds from the IWCL
initial public offering and $42 million due from South Pacific Iridium Holdings
Limited pursuant to the terms of a definitive purchase agreement. At September
30, 1997, debt equaled approximately $1.016 billion, including a $655 million
Guaranteed Bank Facility, under which $235 million was outstanding as of
September 30, 1997. On October 22, 1997, Iridium permanently reduced the bank
commitments under the Guaranteed Bank Facility to $450 million. Borrowings
under the Guaranteed Bank Facility are guaranteed by Motorola (the "Motorola
Guarantee").

On July 16, 1997, Iridium and Iridium Capital Corporation, a wholly
owned subsidiary of Iridium, completed an offering (the "Initial High Yield
Offering") of (i) 300,000 units, each unit consisting of $1,000 principal
amount of 13% Senior Notes due 2005, Series A (the "Series A Notes"), and one
IWCL Warrant, representing the right to purchase 5.2 shares of Class A Common
Stock of IWCL and (ii) $500 million aggregate principal amount of 14% Senior
Notes due 2005, Series B (the "Series B Notes"), for aggregate net proceeds of
approximately $746 million. On October 17, 1997, Iridium and Iridium Capital
Corporation completed an offering (the "Second High Yield Offering") of $300
million aggregate principal amount of 11 1/4% Senior Notes due 2005, Series C
(the "Series C Notes") for aggregate net proceeds of approximately $293
million. The Series A, Series B and Series C Notes mature on July 15, 2005 and
are guaranteed by Iridium IP LLC and Iridium Roaming LLC.

Pursuant to the Memorandum of Understanding, dated July 11, 1997,
between Iridium and Motorola (the "Motorola MOU"), in addition to Motorola's
guarantee of indebtedness under the Guaranteed Bank Facility (reduced to $450
million on October 22, 1997). Motorola has conditionally agreed to 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.
Borrowings under the Guaranteed Bank Facility mature in August 1998. 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 received a commitment letter from Chase Securities, Inc.,
The Chase Manhattan Bank, Barclays Bank PLC and BZW, the investment banking
division of Barclays Bank PLC, for a bank facility (the "Secured Bank
Facility") in a principal amount up to $750 million, to be secured by
substantially all of Iridium's assets and by the Reserve Capital Call (as
defined). The availability of the Secured Bank Facility is subject to
significant conditions, including execution of satisfactory definitive
documentation, technical conditions relating to the IRIDIUM System, conditions
relating to regulatory approvals and distribution agreements and conditions
relating to other financing sources. Borrowings under the Secured Bank
Facility would mature on September 30, 1998, subject to Iridium's right to
extend such maturity until June 30, 1999 if it can demonstrate by July 1, 1998
that is has sufficient available or committed financing for its approved project
costs through such extended maturity. After giving effect to the $745 million
received from the Series A and Series B Notes on July 16, 1997, the $293 million
received from the Series C Notes on October 17, and assuming approximately $450
million of borrowings under the Guaranteed Bank Facility (extended through
Iridium's commencement of commercial operations as discussed above) and full
utilization of the Secured Bank Facility, Iridium expects to have sufficient
cash to meet its anticipated funding

18
<PAGE> 19
requirements through September 1998, the month Iridium expects to commence
commercial operations. Iridium is seeking 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 borrowings.

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. Pursuant to the
Motorola MOU, Iridium agreed that, to the extent the net proceeds to Iridium of
senior note offerings prior to December 31, 1997 including the Series A and
Series B Notes), exceed $650 million, it will apply such excess to a permanent
reduction of the commitments of the lenders under the Guaranteed Bank Facility
(provided that such commitments need not be reduced to an amount less than $275
million). On July 21, 1997 such commitments were reduced to $655 million as a
result of the Initial High Yield Offering. In connection with the issuance of
the Series C Notes, Motorola waived this requirement with respect to proceeds
in excess of $205 million. As a result, on October 22, 1997, Iridium reduced
the commitments under the Guarantee Bank Facility from $655 million to $450
million.

In connection with the Secured Bank Facility, the bank lenders will
require a security interest in substantially all of Iridium's assets and the
Reserve Capital Call, defined as the contractual commitment by 17 of Iridium's
investors to purchase up to 18,206,550 Class 1 Interests at $13.33 per
interest. The bank lenders also will require that the membership interests in
Iridium, or any company to which all or substantially all of Iridium's assets
are transferred, be pledged as security under the Secured Bank Facility. In
connection with granting such security interest, Iridium expects to enter into
a transaction whereby Iridium will establish a new wholly-owned subsidiary and
transfer all or substantially all of its assets and liabilities to that
subsidiary with Iridium remaining as a holding company for the new entity.
Iridium would then pledge all of the membership interests in the new entity to
the bank lenders in connection with the Secured Bank Facility. The new entity
is expected to be a member-managed limited liability company with Iridium
acting as the sole member and would assume Iridium's obligations with respect
to currently outstanding indebtedness of Iridium.

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 indebtedness contain restrictions on, among other things, the
incurrence of indebtedness 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.

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. To date, Iridium's only source of income has been
interest income on the cash and investment balances from the proceeds of equity
commitments, which amounted to approximately $13.8 million from July 29, 1993
(the "Initial Capital Contribution Date") to September 30, 1997. During the
same period, Iridium recorded a net loss of $287 million. In addition, during
the years 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 Iridium to Motorola pursuant to
a reimbursement agreement.

19
<PAGE> 20
As a development stage company, Iridium has incurred losses since its
inception and will continue to do so for the forseeable 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. The costs of
constructing and placing satellites into service are capitalized. 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 $2.95 billion through September 30, 1997. In
addition, costs incurred in connection with the issuance by Iridium of Class 1
Interests are reflected as a reduction of additional paid-in capital and 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 expenses have and will also be
capitalized.

A portion of the payments made under the Operations and Maintenance
Contract will be capitalized and depreciated. 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
September 30, 1997, marketing, general and administrative expenses were
approximately $293 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 system is under construction. This has resulted in all interest costs
being capitalized during 1995, 1996, and the three and nine month periods ended
September 30,1997, and will likely result in similar capitalization for the
remainder of 1997, with the expectation 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 is accrued and such accrual
increases outstanding indebtedness on Iridium's balance sheet.

Income Taxes

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.

20
<PAGE> 21
PART II

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

<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
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
</TABLE>

(b) Reports on Form 8-K

Iridium LLC and Iridium World Communications LTD
filed an 8-K on July 21, 1997 reporting that Motorola had
informed Iridium of the probable loss of one of the Iridium
satellites.

21
<PAGE> 22
IRIDIUM WORLD COMMUNICATIONS LTD.

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

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 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

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: October 31, 1997

22
<PAGE> 23
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------ ---------------------- ----
<S> <C> <C>
11.1 Computation of Loss Per Class A Common Share 24

11.2 Computation of Loss per Class 1 Interest 25

99.1 Certain of the Factors Which May Affect Forward
Looking Statements 26

27 Financial Data Schedule
</TABLE>

<PAGE> 1
EXHIBIT 11.1

IRIDIUM WORLD COMMUNICATIONS LTD.

COMPUTATION OF LOSS PER CLASS A COMMON SHARE
(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
------------------ ------------------
<S> <C> <C>
Net loss applicable to Class A Common shares . . . . . . . . . . . . . $ 7,260 $ 8,039
------------ -------------
Weighted average number of Class A shares outstanding. . . . . . . . . 12,000,000 4,967,033
------------ -------------
Net Loss per Class A Common Share. . . . . . . . . . . . . . . . . . . $ 0.61 $ 1.62
============ =============
</TABLE>

<PAGE> 1
EXHIBIT 11.2
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

COMPUTATION OF LOSS PER CLASS 1 INTEREST
(IN THOUSANDS EXCEPT MEMBER INTEREST DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- --------------------------------
1996 1997 1996 1997
------------ -------------- ------------- -------------
<S> <C> <C> <C> <C>
NET LOSS APPLICABLE TO CLASS 1 INTERESTS:

Net loss . . . . . . . . . . . . . . . . . . . . . . . $ 24,232 $ 84,095 $ 41,735 $ 167,949

Preferred dividend requirement . . . . . . . . . . . . 1,580 1,317 2,419 4,924
----------- ----------- ----------- -----------

Net loss applicable to class 1 interests . . . . . . . $ 25,812 $ 85,412 $ 44,154 $ 172,873
=========== =========== =========== ===========

WEIGHTED AVERAGE NUMBER OF CLASS 1 INTERESTS:

Weighted average number of Class 1 Interests outstanding 120,821,421 141,219,180 119,523,754 130,065,304

Fully diluted adjustments (2):
Subscribed but unissued Class 1 Interests . . . . 14,604 - 938,835 -

Assumed exercise of options and warrants . . . . . 6,060,205 15,074,424 3,843,771 13,519,580

Assumed conversion of Series A Class 2 Interest . 699,400 688,461 226,359 869,544
----------- ----------- ----------- -----------

Weighted average number of Class 1 Interests assumed to
be outstanding, assuming full dilution . . . . . . 127,595,630 156,982,065 124,532,719 144,454,428
=========== =========== =========== ===========

NET LOSS PER CLASS 1 INTEREST:

Primary (1) . . . . . . . . . . . . . . . . . . . . . . $ 0.21 $ 0.60 $ 0.37 $ 1.33

Fully diluted (2) . . . . . . . . . . . . . . . . . . . $ 0.20 $ 0.54 $ 0.35 $ 1.20
</TABLE>

(1) The assumed exercise of options and warrants in periods of net loss
are anti-dilutive and are not included in the computation and
presentation of primary loss per Class 1 Interest.

(2) The assumed exercise of options, warrants, and conversion of Series A
Class 2 Interests are anti-dilutive but are included in the
calculation of fully diluted loss per Class 1 Interest in accordance
with Regulation S-K, Item 601 (a) (11).

<PAGE> 1
EXHIBIT 99.1

CERTAIN FACTORS WHICH MAY AFFECT
FORWARD LOOKING STATEMENTS

The following risk factors should be carefully considered by prospective
investors in IWCL or Iridium.

DEVELOPMENT STAGE COMPANY; ABSENCE OF REVENUES

Iridium is a development stage enterprise with no operating history. There is
no operating or financial data about the IRIDIUM System on which to base an
evaluation of the IRIDIUM System's performance and an investment in IWCL or
Iridium. Iridium currently has no source of revenues other than nominal
interest income. No assurances can be given that the IRIDIUM System will become
commercially operational, or that Iridium will have revenues from operations or
become profitable.

SIGNIFICANT ADDITIONAL FUNDING NEEDS

Iridium anticipates total funding requirements of approximately $4.4 billion
through September 1998, the month Iridium expects to commence commercial
operations, and $5.3 billion (net of assumed revenues following commercial
activation) through year-end 1999, the last year in which Iridium projects
negative cash flow and a net increase in year-end borrowings. Based on funds
raised or committed to date, Iridium expects to have sufficient cash to meet
its anticipated funding requirements through September 1998, the month Iridium
expects to commence commercial operations. Iridium is seeking other senior bank
financing in order to meet its expected funding requirements through at least
year-end 1999. Iridium's estimated funding requirements do not reflect any
contingency amounts and therefore those requirements may increase, perhaps
substantially, in the event of unexpected cost increases or schedule delays.
There can be no assurance that Iridium will secure the financing it needs to
meet its actual funding requirements.

RISK OF HIGHLY LEVERAGED CAPITAL STRUCTURE

Iridium is a development stage company with a highly leveraged capital
structure and expects to incur substantial additional indebtedness, including
secured indebtedness. The amount of debt needed to finance the IRIDIUM System
could be increased by one or more factors outside the control of Iridium.
Iridium currently has no significant income-producing assets from which to
service its indebtedness.

POTENTIAL FOR DELAY AND COST OVERRUNS

Iridium's business plan assumes the IRIDIUM System will commence commercial
operations in September 1998. Motorola's construction schedule for the
satellites in the IRIDIUM System requires an unprecedented rate of satellite
assembly for commercial telecommunications systems. A significant delay in the
delivery of the satellites needed for the space segment would materially and
adversely affect Iridium's operations. A significant delay in the date the
IRIDIUM System becomes fully operational would harm the competitive position of
Iridium by eroding the timing advantages Iridium currently anticipates, would
delay the generation of revenue by Iridium and might significantly affect
Iridium's ability to pay interest on, and the principal of, its indebtedness.

The operation of the IRIDIUM System is dependent on the successful
construction and operation of gateways. Iridium closely monitors the progress
of each gateway and the construction of nine of the eleven gateway facilities
is substantially complete and authorization for construction of the remaining
two gateways is being sought. However, there can be no assurance that one or
more gateways will not fail to be completed by the commencement of commercial
operations, which could have a material adverse effect upon Iridium.

Prior to commencement of commercial operations, Iridium must develop and, in
conjunction with each of the gateway owners, integrate and test software
related to the operation of the IRIDIUM System, including the business support
systems. A significant delay in the development, deployment or implementation
of such software systems would have a material adverse effect on Iridium.

26
<PAGE> 2
Significant delay in the development, manufacture and sale of phones and
pagers would have a material adverse effect on Iridium. Planned commercial
operation of the IRIDIUM System assumes that commercial quantities of the
portable, hand-held phones, Terrestrial Radio Cassettes and belt-worn pagers
will be ordered approximately six months in advance of expected delivery and
then produced for distribution shortly in advance of the commencement of
commercial operations. There can be no assurance that any such products will be
developed, manufactured and sold on a timely basis.

TECHNOLOGY IMPLEMENTATION RISKS

To build the IRIDIUM System, Motorola and its subcontractors must integrate a
number of sophisticated technologies. The integration of this array of diverse
technologies is a complex task which has not previously been attempted and is
further complicated by the fact that a significant portion of the hardware
components associated with the IRIDIUM System will be in space.

CONSEQUENCES OF SATELLITE SERVICE LIMITATIONS ON CUSTOMER ACCEPTANCE

Iridium's ability to generate sufficient operating revenues will depend upon
customer acceptance of and satisfaction with IRIDIUM Services, which in turn
will depend upon a variety of factors, including the price and technical
capabilities of the IRIDIUM Services and equipment, and the extent,
availability and price of alternative telecommunications services.

Based upon current testing and simulations, IRIDIUM subscribers using IRIDIUM
Satellite Services via portable, hand-held phones should expect some
degradation in service quality and availability to occur in environments where
obstructions, such as trees, buildings and other natural and man-made
obstacles, are positioned between a satellite and the user. The severity of
this degradation will increase as the obstacles become larger and more densely
spaced. In addition, only extremely limited satellite voice service, or no
satellite voice service, is expected to be available in densely packed urban
environments or inside buildings with steel construction and metal coated glass
common in many urban high rise buildings. Also, because the structure of
automobiles will tend to obstruct the satellite signal, use of a hand-held
Iridium phone in a moving automobile will make the effect of environmental
obstructions temporary but more pronounced. The actual limitations will vary,
sometimes significantly, as actual situations and conditions change and as the
satellites move across the sky. The IRIDIUM satellite paging service will also
be unable to provide service in certain environments where terrestrial paging
generally would. While Iridium believes that the addition of Iridium Cellular
Roaming Services ("ICRS") and the availability of multi-mode phones will lessen
the effect of these obstacles by providing access to local cellular service (if
available and if the local cellular provider has an agreement in place with
Iridium) in environments in which the IRIDIUM Satellite Service is unavailable
or degraded, there can be no assurance that the service limitations will not
result in significantly lower sales to professionals and other travelers than
Iridium anticipates.

RISKS RELATED TO ICRS

Subscribers to Iridium's ICRS service will not experience the
satellite-related service limitations when their multi-mode phone is accessing
local wireless service, for example, in major urban areas. While the
availability of ICRS may lessen somewhat the impact of the satellite-related
service limitations, ICRS will only be available in an area if (i) that area
has an existing wireless system, (ii) the system uses a protocol supported by
Iridium and (iii) that system has a roaming agreement with Iridium.

In order for Iridium to offer interprotocol ICRS, Motorola entered into a
contract with a third-party supplier to develop, manufacture and deliver the
IIU that will permit protocol translation. However, there can be no assurance
that the required IIU will be delivered on a timely basis.

27
<PAGE> 3
SATELLITE LAUNCH RISKS

In order for the IRIDIUM System to be fully operational under its current
specifications and timetable, Iridium anticipates the need to launch
successfully at least 66 low earth orbit satellites in the 12 to 15 month
period from the first launch on May 5, 1997. Moreover, to maintain the system,
additional satellites are expected to be launched each year during the term of
the Operations and Maintenance Contract. No other commercial satellite
communications system has required this number of launches to become fully
deployed and operational. There can be no assurance that Iridium's satellites
will be successfully deployed in a timely manner or that launch failures,
whether or not deploying IRIDIUM satellites, will not occur and materially and
adversely affect Iridium.

The terms of the Space System Contract provide that Motorola will bear the
responsibility of launching the satellites that comprise the space segment.
Nevertheless, Iridium retains the risk of cost overruns and delays associated
with excusable delays, including delays in launch provider schedules due to
prior delays of launches of non-IRIDIUM satellites, and the risk of economic
damage due to any delay or reduced performance beyond the limited remedies
provided by the Space System Contract.

LIMITED LIFE OF SATELLITES; COST OF MAINTAINING THE SPACE SEGMENT; RISK OF
SATELLITE FAILURE OR DAMAGE

A significant portion of Iridium's tangible assets will be represented by the
satellites in the space segment. Iridium's business plan currently assumes that
the satellites will have a useful life of five years. There can be no assurance
that any satellite will actually achieve such a useful life.

Maintaining the space segment is a complex undertaking which has not
previously been attempted on a commercial basis. The cost of maintaining the
space segment and the risk of loss of satellites are significant. Iridium has
entered into an Operations and Maintenance Contract with Motorola which
provides for the operation and maintenance of the space segment for its first
five years of operation. Iridium has the option to extend the Operations and
Maintenance Contract for an additional two years. Under the Operations and
Maintenance Contract, Iridium will bear the risk of damage to satellites by the
acts of third parties (including but not limited to the degradation or complete
loss of any satellite due to contact with space debris of any size or
character). Satellites operating in the low earth orbit region, such as the
IRIDIUM satellites, face a higher risk of damage from space debris than
satellites operating in geostationary orbit.

Premature failure or interruption of one or more satellites, including
temporary losses, that for whatever reason are not promptly corrected or
replaced, could, among other things, cause gaps in service availability,
significantly degrade service quality, increase costs in the event Iridium is
liable, and result in loss of revenue for the period that service is
compromised and, as a result, could materially and adversely affect Iridium.

RISKS ASSOCIATED WITH LICENSING AND SPECTRUM ALLOCATION

The operation of the IRIDIUM System is and will continue to be subject to
United States and international regulation. This regulation is pervasive and
largely outside Iridium's direct control. Iridium, Motorola, and the various
gateway owners have made substantial progress in taking the steps needed to
implement the IRIDIUM System, but a significant number of additional regulatory
approvals remain to be obtained, in particular with respect to (1) in each
country in which a gateway or system control terminal will be located, the
authorizations to construct and operate those facilities, including necessary
gateway link spectrum assignments, (2) in each country in which IRIDIUM
subscriber equipment will be operated, the authority to market and operate that
equipment with the IRIDIUM System, user link spectrum assignments, and
authorization to offer IRIDIUM communications services, (3) international
coordination of the IRIDIUM System under the auspices of the ITU or domestic
coordination in each country where IRIDIUM Services are offered with other
entities using or proposing to use the spectrum required for the IRIDIUM System
or adjacent spectrum, to ensure the avoidance of harmful interference, and (4)
the domestic allocation in each country of spectrum for MSS and Aeronautical
Mobil Satellite (Route) Service ("AMSRS") use.

28
<PAGE> 4
COMPETITIVE RISKS

Certain sectors of the telecommunications industry are highly competitive in
the United States and in other countries. While no single wireless
communications system serves the global personal communications market today,
Iridium anticipates that more than one system will serve this market in some
fashion in the future. Iridium also expects to face competition from regional
geostationary satellite-based systems. Certain services are already available
to provide roaming services among a number of countries, including those that
use incompatible cellular standards. These services will compete directly with
Iridium's ICRS service and with Iridium's satellite-based phone services for
traveling professionals who travel between or among territories with
incompatible cellular standards. Moreover, it is expected that GSM-based
service will continue to expand its reach (including further into North
America), permitting broader roaming capability by subscribers to such systems
without the need for any interprotocol equipment and with a single phone.
Iridium will also compete for travel customers with businesses that provide
short-term rentals of terrestrial wireless phones capable of operating in
specific countries or regions.

RELIANCE ON MOTOROLA, GATEWAY OWNERS AND OTHER THIRD PARTIES

Construction and Operation of the IRIDIUM System

Iridium does not independently have and does not intend to acquire, except by
contracting with other parties, the ability to design, develop or produce the
components of the IRIDIUM System or to launch the constellation of satellites
or to operate and maintain the system once it is fully deployed. Motorola has
agreed to provide these services to Iridium under the Space System Contract,
the Operations and Maintenance Contract and the Terrestrial Network Development
Contract. Thus, Iridium currently relies on Motorola to perform these critical
tasks.

Motorola is also supplying gateway equipment and associated services and
Iridium believes that currently Motorola and Kyocera are the only companies
that are planning to develop and sell subscriber equipment. If for any reason
Motorola or any of its important subcontractors fail to perform as required
under the agreements, the ability of Iridium to implement the IRIDIUM System on
time and within estimated costs and, once implemented, to maintain and operate
the system, could be materially and adversely affected.

Iridium has obtained commitments from its investors who are gateway operators
that they will use their reasonable best efforts to perform certain critical
functions including: obtaining the necessary licenses, if any, from the
jurisdictions in which they operate; constructing and operating the gateways;
connecting the IRIDIUM System to PSTNs; marketing IRIDIUM Services; selecting,
or acting as, service providers; and managing relations with IRIDIUM System
subscribers either directly or through service providers. Iridium is dependent
on the activities of its gateway operators for its success. Some gateway
operators are behind schedule in the steps necessary to establish and implement
their gateways. Other gateway operators have indicated that they may not
receive regulatory approvals for some of the countries in their territories at
the anticipated commencement of commercial operations in September 1998.
Motorola has indicated that several gateways are currently late in complying
with some of these conditions. In particular, the China gateway and the Middle
East-Africa gateway are substantially behind schedule. Motorola currently
intends to activate the gateway equipment for paging functionality at a portion
of the gateways by September 1998 with the remainder activated by October 1998.

There can be no assurance that Motorola will be able to meet its gateway
supply commitments or that gateway operators will perform their obligations
under gateway authorization agreements or gateway equipment purchase
agreements.

Distribution and Marketing of IRIDIUM Services

The sales of IRIDIUM Services and of IRIDIUM subscriber equipment to the
ultimate consumer will be made by service providers which will be, or will be
selected by, Iridium's gateway operators. Iridium's business plan assumes
substantial sales of IRIDIUM subscriber equipment by service providers prior to
the commencement

29
<PAGE> 5
of commercial services. Iridium's success will depend upon the ability of such
service providers to generate on a timely basis demand for IRIDIUM Services and
subscriber equipment, and there can be no assurance that such demand can be
generated on a timely basis.

A number of gateway operators have entered into non-binding memoranda of
understanding with entities that have indicated an interest in becoming IRIDIUM
service providers in their service territories but have not yet executed
definitive agreements to any significant extent. The willingness of companies
to become service providers will be dependent upon a variety of factors
including pricing of services and compensation to service providers, local
regulations and the perceived competitiveness of the IRIDIUM System.

RISKS ASSOCIATED WITH PRINCIPAL SUPPLY CONTRACTS

Space System Contract

Iridium and Motorola have entered into the Space System Contract which
provides for the payment by Iridium to Motorola of $3.45 billion (subject to
certain adjustments) for the design, development, production and delivery in
orbit of the space segment. As of September 30, 1997, Iridium had paid $2.72
billion of this amount, and all but $150 million of this price is required to
be paid by Iridium before the space segment is determined to be fully
operational. Furthermore, Motorola's aggregate liability under the Space System
Contract and related contracts with Iridium in the event the system is not
operational is limited and in no event is Motorola required under the contract
to refund amounts previously paid by Iridium to Motorola. In addition, subject
to certain exceptions, Iridium bears the risk, including additional costs, if
any, resulting from excusable delays under the Space System Contract, as well
as certain of the risks of loss for satellites once placed in orbit. There can
be no assurance that events constituting "excusable delays" will not arise in
the future, or, if any event constituting an "excusable delay" does arise, that
it will be resolved on terms that are not materially adverse to Iridium.

The Space System Contract provides that, to the extent Motorola has any
liability to Iridium under the contract for any costs, damages, claims or
losses whatsoever arising out of or related to such contract, or any such
liability under the Operations and Maintenance Contract, the Terrestrial
Network Development Contract or any other contract executed between Iridium and
Motorola in connection with the IRIDIUM System, or any provisions of any of the
foregoing, whether pursued as a breach of contract or as a tort or other cause
of action and whether accruing before or after completion of all the work
required under the contracts, such liability shall be limited to $100 million
in the aggregate.

Operations and Maintenance Contract

Iridium has also entered into the Operations and Maintenance Contract with
Motorola which obligates Motorola for a period of five years after completion
of the final milestone under the Space System Contract to operate the IRIDIUM
space segment and to exert its best efforts to monitor, upgrade and replace the
hardware and software of the IRIDIUM space segment as necessary to maintain
specified performance levels. Iridium has the right to extend the term of this
contract for an additional two years. This contract provides for specified
increasing quarterly payments by Iridium to Motorola that are expected to
aggregate approximately $2.88 billion, subject to certain adjustments. If
Iridium exercises its option to extend the Operations and Maintenance Contract
for an additional two years, the payments due will be based upon specified
quarterly payments ranging up from $157 million in 2003. Such payments are
expected to aggregate approximately $1.33 billion, subject to certain
adjustments.

The Operations and Maintenance Contract contains provisions relating to
indemnification, excusable delays, insurance, permits and licenses, waivers of
rights, events of default and other matters similar to those contained in the
Space System Contract. Motorola's liability under the Operations and
Maintenance Contract is limited. In the event that the Space System Contract is
terminated for whatever reason, the Operations and Maintenance Contract will
also terminate.

30
<PAGE> 6
Terrestrial Network Development Contract

Iridium has also entered into the Terrestrial Network Development Contract
with Motorola, pursuant to which Motorola is obligated to design and develop
the gateway hardware and software, and license Iridium to use and permit others
to use intellectual property developed under the contract to procure the
development and manufacture of gateways from sources other than Motorola.
Motorola will be paid a total of approximately $284 million under the contract
in increments tied to the completion of milestones, including those relating to
acceptance tests of the completed gateway design. Motorola's liability under
the Terrestrial Network Development Contract is limited and the contract
contains provisions relating to excusable delays, waivers of rights, events of
default and other matters similar to those contained in the Space System
Contract and the Operations and Maintenance Contract.

CONFLICTS OF INTEREST WITH MOTOROLA

Motorola has and will have various conflicts of interest with Iridium.
Motorola is the creator and developer of the concept of the IRIDIUM System, the
principal supplier to Iridium, a founding investor of Iridium, a gateway owner,
Iridium's largest Class 1 Interest holder, a holder of warrants to acquire
Class 1 Interests and a warrant to acquire Series M Class 2 Interests and, the
guarantor of Iridium's borrowings under its Guaranteed Bank Facility. Although
Motorola does not by itself control the Iridium Board and is not permitted to
participate in decisions or other actions by Iridium with respect to the Space
System Contract, Operations and Maintenance Contract and the Terrestrial
Network Development Contract, Motorola could in certain situations exercise
significant influence over Iridium.

Iridium was a wholly-owned subsidiary of Motorola at the time the Space
System Contract and Operations and Maintenance Contract were negotiated and
therefore the negotiations between Iridium and Motorola were not conducted on
an arm's-length basis. Iridium's payment obligations under these agreements are
expected to comprise most of its expenses.

CONFLICTS OF INTEREST WITH GATEWAY OWNERS

The Iridium Board consists of representatives of certain of the world's
leading telecommunications companies. Almost all of the members of the Iridium
Board have been appointed by investors in Iridium who also are gateway owners
and service providers. Because Iridium will be a supplier to the gateways and
the service providers, the interests of Iridium are expected to conflict in
certain respects with the interests of the gateway owners and the service
providers. For example, this conflict of interest will be relevant in setting
the wholesale prices that Iridium will charge for airtime and other IRIDIUM
Services.

RISK ASSOCIATED WITH INTERNATIONAL OPERATIONS AND DEVELOPING MARKETS

Since Iridium expects to provide telecommunications services in almost
every country, it is subject to certain multinational operational risks, such
as changes in domestic and foreign government regulations and
telecommunications standards, licensing requirements, tariffs or taxes and
other trade barriers, price, wage and exchange controls, political, social and
economic instability, inflation, and interest rate and currency fluctuations.
The risks enumerated above are often greater in developing countries or
regions. In addition, although Iridium anticipates that gateway operators and
service providers will make all payments in United States dollars, the
potential lack of available United States currency in developing markets may
prevent gateway operators and service providers in such markets from being able
to do so. Because Iridium expects to receive most payments in United States
dollars it does not intend to hedge against exchange rate fluctuations. Under
current United States law, Iridium, as a U.S. company, may be prohibited from
doing business in Cuba, Iran, Iraq, Libya and North Korea. These restrictions
may limit, or eliminate entirely, the provision of gateway services or IRIDIUM
Services in these countries. Motorola and other United States companies may
also be prohibited from selling equipment in these countries.

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Iridium
LLC's financial statements for the quarter ended September 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000948421
<NAME> IRIDIUM LLC
<MULTIPLIER> 1,000

<S> <C>
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<PERIOD-START> JUL-01-1997
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0
38,511
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</TABLE>