<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

                                       OR

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

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998


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

<TABLE>
  <S>                                 <C>                        <C>
              DELAWARE                        0-22637-02             52-2066319
    (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 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)

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

                                 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)

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

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


<TABLE>
  <S>                                 <C>                        <C>
              DELAWARE                      333-44349-04             52-2083969
    (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 X   No  
<TABLE>                                     -      -
<CAPTION>
                                                                   SHARES OUTSTANDING
                     CLASS                                         AT NOVEMBER 10, 1998              
         ------------------------------------               --------------------------------
             <S>                                                     <C>
                  Iridium World                            
                 Communications Ltd.                                 12,179,485
               Common Stock, Class A                       
             $0.01 par value per share
</TABLE>
<PAGE>   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
                         IRIDIUM FACILITIES CORPORATION
                                 -----------
                               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, 1998 and December 31, 1997                                          5
                                                                                            
             Unaudited Condensed Statements of Loss                                         
                 For the three and nine months ended September 30, 1998 and 1997                   6
                                                                                            
             Unaudited Condensed Statements of Cash Flows                                   
                 For the nine months ended September 30, 1998 and 1997                             7
                                                                                            
             Notes to Unaudited Condensed Financial Statements                                     8
                                                                                            
             IRIDIUM LLC                                                                    
                                                                                            
             Condensed Consolidated Balance Sheets                                          
                 September 30, 1998 and December 31, 1997                                          10
                                                                                            
             Unaudited Condensed Consolidated Statements of Loss                            
                 For the three and nine months ended September 30, 1998 and 1997                   11
</TABLE>


                                       3
<PAGE>   4
<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                             NUMBER  
                                                                                                         --------------
<S>                                                                                                            <C>
             Unaudited Condensed Consolidated Statements of Cash Flows
                 For the nine months ended September 30, 1998 and 1997                                         12

             Notes to Unaudited Condensed Consolidated Financial Statements                                    13

             IRIDIUM OPERATING LLC (INCLUDING:  IRIDIUM CAPITAL CORPORATION,
             IRIDIUM IP LLC, IRIDIUM ROAMING LLC AND IRIDIUM FACILITIES CORPORATION)

             Condensed Consolidated Balance Sheets
                 September 30, 1998 and December 31, 1997                                                      17

             Unaudited Condensed Consolidated Statements of Loss
                 For the three and nine months ended September 30, 1998 and 1997                               18

             Unaudited Condensed Consolidated Statements of Cash Flows
                 For the nine months ended September 30, 1998 and 1997                                         19

             Notes to Unaudited Condensed Consolidated Financial Statements                                    20

ITEM 2       Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                                                           24

ITEM 3       Quantitative and Qualitative Disclosure About Market Risk                                         32

PART II      OTHER INFORMATION

ITEM 1       Legal Proceedings                                                                                 33

ITEM 2       Changes in Securities and Use of Proceeds                                                         33

ITEM 3       Defaults upon Senior Securities                                                                   33

ITEM 4       Submission of Matters to a Vote of Security Holders                                               33

ITEM 5       Other Information                                                                                 33

ITEM 6       Exhibits and Reports on Form 8-K                                                                  33

SIGNATURES                                                                                                     34

EXHIBIT INDEX                                                                                                  36
</TABLE>


                                       4
<PAGE>   5

                        IRIDIUM WORLD COMMUNICATIONS LTD.

                            CONDENSED BALANCE SHEETS
                        (In Thousands Except Share Data)



<TABLE>
<CAPTION>
                                                                                                         SEPTEMBER 30,
                                                                                         DECEMBER 31,         1998
                                                                                             1997         (UNAUDITED)
                                                                                         ------------    --------------
                                     ASSETS
<S>                                                                                       <C>              <C>      
Cash ..............................................................................       $       -        $       -
Investment in Iridium LLC .........................................................         223,922          157,294
                                                                                          ---------        ---------
            Total assets ..........................................................       $ 223,922        $ 157,294
                                                                                          =========        =========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

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

Stockholders' equity:
    Class B Common stock, non-voting, par value $0.01; 2,500,000 shares authorized;
       none and 20,625 issued and outstanding .....................................               -                -
    Class A Common stock, voting, par value $0.01; 50,000,000 shares authorized;
        12,003,262 and 12,175,690 issued and outstanding ..........................             120              122
    Additional paid-in capital ....................................................         242,636          245,980
    Accumulated deficit ...........................................................         (18,834)         (88,808)
                                                                                          ---------        ---------
                                                                                            223,922          157,294
                                                                                          ---------        ---------
            Total liabilities and stockholders' equity ............................       $ 223,922        $ 157,294
                                                                                          =========        =========
</TABLE>




    The accompanying notes are an integral part of these 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,                       SEPTEMBER 30,
                                                               ----------------------------         ---------------------------
                                                                   1997              1998              1997              1998
                                                               ----------        ----------         ---------        ----------
<S>                                                           <C>               <C>               <C>               <C>
Equity in loss of Iridium LLC ............................    $     7,260       $    31,615       $     8,039       $    69,974
                                                               ----------        ----------         ---------        ----------
Loss before income taxes .................................          7,260            31,615             8,039            69,974
Income taxes .............................................              -                 -                 -                 -
                                                               ----------        ----------         ---------        ----------
Net loss .................................................    $     7,260       $    31,615       $     8,039       $    69,974
                                                               ==========        ==========         =========        ==========
Net loss per Class A Common share - basic and diluted ....    $      0.61       $      2.62       $      1.62       $      5.81
                                                               ----------        ----------         ---------        ----------
Weighted average shares used in computing
  net loss per Class A Common share - basic and diluted ..     12,000,000        12,084,446         4,967,033        12,050,913
                                                               ==========        ==========         =========        ==========
</TABLE>



    The accompanying notes are an integral part of these condensed financial
                                  statements.
                                       6
<PAGE>   7
                       IRIDIUM WORLD COMMUNICATIONS LTD.

                  UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
                                ( In Thousands )

<TABLE>
<CAPTION>
                                                                                                       NINE MONTHS ENDED
                                                                                                         SEPTEMBER 30,
                                                                                                 --------------------------
                                                                                                    1997            1998
                                                                                                 ---------        ---------

<S>                                                                                              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES :
    Net loss .............................................................................       $  (8,039)       $ (69,974)
    Adjustments to reconcile net loss to net cash
        used in operating activities -
            Equity in loss of Iridium LLC ................................................           8,039           69,974
                                                                                                 ---------        ---------
Net cash used in operating activities ....................................................               -                -
                                                                                                 ---------        ---------

CASH FLOWS FROM INVESTING ACTIVITIES :
    Investments in Iridium LLC ...........................................................        (242,713)          (3,346)
                                                                                                 ---------        ---------
                                                                                                  (242,713)          (3,346)
                                                                                                 ---------        ---------

CASH FLOWS FROM FINANCING ACTIVITIES :
    Net proceeds from equity offering ....................................................         225,600                -
    Proceeds from Class B Common Stock ...................................................               -              275
    Proceeds from Class A Common Stock subscribed ........................................              12                -
    Retirement of Class A Common Stock ...................................................             (12)               -
    Proceeds from warrants issued in conjunction with Iridium LLC Series A Senior Notes ..          17,113                -
    Proceeds from warrants exercised in conjunction with Iridium LLC Series A Senior Notes               -            2,065
    Proceeds from exercise of stock options ..............................................               -            1,006
                                                                                                 ---------        --------- 
Net cash provided by financing activities ................................................         242,713            3,346
                                                                                                 ---------        --------- 

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

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

CASH, end of period ......................................................................      $        -       $        -
                                                                                                 =========        ========= 
</TABLE>


    The accompanying notes are in integral part of these condensed financial
                                  statements.
                                       7
<PAGE>   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, which was a development stage limited liability company at that
time. 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 was
invested in 12,000,000 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.

           On July 13, 1997, in connection with the issuance of Series A Notes
by Iridium LLC, IWCL issued 300,000 warrants to purchase up to 1,560,000 shares
of Class A Common Stock and applied the net proceeds to purchase warrants to
acquire up to 1,560,000 Class 1 Interests from Iridium LLC. When a warrant to
purchase Class A Common Stock is exercised, IWCL is required to exercise a
corresponding warrant to purchase Class 1 Interests. As of September 30, 1998,
19,000 warrants were exercised to purchase 98,800 shares of Class A Common Stock
resulting in net proceeds of approximately $2 million to IWCL. The net proceeds
from the exercise of these 19,000 warrants were used by IWCL to exercise
warrants to purchase 98,800 invested in Class 1 Interests of Iridium LLC.

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

           IWCL's sole assets are its investments in Iridium LLC. At September
30, 1998, IWCL owned approximately 8.62% 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 September 30, 1998 and its results of
operations for the three and nine month periods ended September 30, 1998 and
1997, and its cash flows for the nine month periods ended September 30, 1998 and
1997. 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 consolidated
financial statements of Iridium LLC and the footnotes thereto included in the
Annual Report on Form 10-K.

           Since its inception on December 12, 1996 through September 30, 1998,
IWCL has not entered into any operating transactions or incurred any operating
expenses. The results of operations for the three and nine months ended
September 30, 1998 are not necessarily indicative of the results of operations
expected in the future.

3.         STOCKHOLDERS' EQUITY

NOMAD PROGRAM

           IWCL and Iridium LLC have commenced a NOMAD 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 are required to pay only a
minimum amount equal to the per share par value of the Class B Common Stock;
$.01 per share. The balance of the purchase price is payable through the
withholding of dividends, if any, which would otherwise be payable on 


                                        8

<PAGE>   9


                        IRIDIUM WORLD COMMUNICATIONS LTD.
                NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS


the shares of Class B Common Stock. However, a holder of Class B Common Stock
may elect to pay the entire 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 mirror the payment terms on the Class B Common Stock. As of
September 30, 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
recognized at a fair value of $33.88 per share (the trading price of the Class A
Common Stock at the date of issue) with a corresponding increase in IWCL's
investment in Iridium LLC. In accordance with the Share Issuance Agreement, the
net proceeds were invested in Class 1 Interests of Iridium LLC.


4.  EARNINGS (LOSS) 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, stock options and Class B Common Stock. Due to the losses incurred
during the three and nine months ended September 30, 1998 and 1997, the impact
of the warrants, stock options and Class B Common Stock is anti-dilutive and is
not included in the diluted earnings (loss) per share calculations.


                                        9
<PAGE>   10
                                   IRIDIUM LLC
                ( A Development Stage Limited Liability Company )

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

<TABLE>
<CAPTION>
                                                                                                                  SEPTEMBER 30,
                                                                                        DECEMBER 31,                  1998
                                                                                            1997                   (UNAUDITED)
                                                                                    ---------------------     ----------------------
<S>                                                                                <C>                       <C>
                               ASSETS
Current assets :
    Cash and cash equivalents....................................................  $               9,040     $               65,207
    Restricted cash..............................................................                350,220                          -
    Due from affiliates..........................................................                 13,604                     20,667
    Prepaid expenses and other current assets....................................                  6,612                     18,407
                                                                                    ---------------------     ----------------------
        Total current assets.....................................................                379,476                    104,281
Property and equipment, net......................................................              1,526,326                  2,865,070
System under construction........................................................              1,625,054                    523,739
Other assets.....................................................................                114,831                     71,512
                                                                                    ---------------------     ----------------------
        Total assets.............................................................  $           3,645,687     $            3,564,602
                                                                                    =====================     ======================

                               LIABILITIES AND MEMBERS' EQUITY
Current liabilities :
    Accounts payable and accrued expenses........................................  $             106,794     $              101,036
    Accounts payable to Member...................................................                 10,601                    221,765
    Bank facilities, current portion.............................................                350,000                    681,500
                                                                                    ---------------------     ----------------------
        Total current liabilities................................................                467,395                  1,004,301
Bank facilities, net of current portion..........................................                210,000                          -
Long-term debt due to Members....................................................                273,302                    310,149
Notes payable, $1,450,000 principal amount as of September 30, 1998..............              1,054,288                  1,404,742
Other liabilities................................................................                  6,065                     11,169
                                                                                    ---------------------     ----------------------
        Total liabilities........................................................              2,011,050                  2,730,361
                                                                                    ---------------------     ----------------------

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 44,406 interests issued
               and outstanding; liquidation value of $39,907 and $44,406.........                 39,907                     44,406
            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
        141,415,495 interests issued and outstanding.............................              2,024,220                  2,031,835
    Deferred Class 1 Interest compensation.......................................                 (1,454)                    (1,242)
    Adjustment for minimum pension liability.....................................                   (643)                      (643)
    Deficit accumulated during the development stage.............................               (427,393)                (1,240,115)
                                                                                    ---------------------     ----------------------
        Total members' equity....................................................              1,634,637                    834,241
                                                                                    ---------------------     ----------------------
        Total liabilities and members' equity....................................  $           3,645,687     $            3,564,602
                                                                                    =====================     ======================
</TABLE>


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

                                       10

<PAGE>   11


                                  IRIDIUM LLC
               ( A Development Stage Limited Liability Company )

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

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED SEPTEMBER 30,
                                                             -------------------------------------------
                                                                    1997                   1998         
                                                             --------------------   --------------------
<S>                                                         <C>                    <C>
OPERATING EXPENSES
    Sales, general and administrative...................    $             39,061   $            129,099 
    Depreciation and amortization.......................                  45,936                152,627 
                                                             --------------------   --------------------
        Total operating expenses........................                  84,997                281,726 
OTHER INCOME
    Interest expense (income), net......................                    (902)                82,655 
                                                             --------------------   --------------------
Loss before provision for income taxes..................                  84,095                364,381 
Provision for income taxes..............................                       -                      - 
                                                             --------------------   --------------------
Net loss................................................    $             84,095   $            364,381 
                                                             ====================   ====================
Preferred dividend requirement..........................                   1,317                  1,553 
                                                             --------------------   --------------------
Net loss applicable to Class 1 Interests................    $             85,412   $            365,934 
                                                             ====================   ====================
Net loss per Class 1 Interest - basic and diluted.......    $               0.60   $               2.59 
                                                             ====================   ====================
Weighted average interests used in computing
  net loss per Class 1 Interest - basic and diluted.....             141,219,180            141,324,251 
                                                             ====================   ====================
</TABLE>

<TABLE>
<CAPTION>
                                                                                                                   PERIOD FROM
                                                                                                                  JUNE 14, 1991
                                                                                                               (INCEPTION) THROUGH
                                                                     NINE MONTHS ENDED SEPTEMBER 30,            SEPTEMBER 30, 1998
                                                             ------------------------------------------------  --------------------
                                                                     1997                     1998
                                                             ---------------------   -----------------------
<S>                                                         <C>                     <C>                       <C>
OPERATING EXPENSES
    Sales, general and administrative...................    $             122,926   $               261,261   $            574,562
    Depreciation and amortization.......................                   46,539                   378,276                499,705
                                                             ---------------------   -----------------------   --------------------
        Total operating expenses........................                  169,465                   639,537              1,074,267
OTHER INCOME
    Interest expense (income), net......................                   (1,516)                  173,185                157,877
                                                             ---------------------   -----------------------   --------------------
Loss before provision for income taxes..................                  167,949                   812,722              1,232,144
Provision for income taxes..............................                        -                         -                  7,971
                                                             ---------------------   -----------------------   --------------------
Net loss................................................    $             167,949   $               812,722   $          1,240,115
                                                             =====================   =======================   ====================
Preferred dividend requirement..........................                    4,924                     4,499
                                                             ---------------------   -----------------------
Net loss applicable to Class 1 Interests................    $             172,873   $               817,221
                                                             =====================   =======================
Net loss per Class 1 Interest - basic and diluted.......    $                1.33   $                  5.78
                                                             =====================   =======================
Weighted average interests used in computing
  net loss per Class 1 Interest - basic and diluted.....              130,065,304               141,289,887
                                                             =====================   =======================
</TABLE>


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

                                       11

<PAGE>   12


                                   IRIDIUM LLC
                ( A Development Stage Limited Liability Company )

            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                ( In Thousands )

<TABLE>
<CAPTION>
                                                                                        NINE MONTHS ENDED            PERIOD FROM
                                                                                          SEPTEMBER 30,             JUNE 14, 1991
                                                                                  -----------------------------  (INCEPTION) THROUGH
                                                                                     1997              1998       SEPTEMBER 30, 1998
                                                                                  -----------    --------------  -------------------
<S>                                                                              <C>            <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES :
    Net loss..................................................................   $  (167,949)         (812,722)    $  (1,240,115)
    Adjustments to reconcile net loss to net cash
        used in operating activities -
            Depreciation and amortization.....................................        46,539           378,276           499,705
            Interest converted to additional debt.............................             -            52,570            52,570
            Expense recognized for warrants issued in
               connection with debt guarantee.................................        48,631             8,344            89,678
            Employee Class 1 Interest compensation............................            38               212               364
            Loss on disposal of assets........................................             -                 -                87
            Changes in assets and liabilities:
                Increase in prepaid expenses and other current assets.........        (7,699)           (4,266)          (10,878)
                Increase in due from affiliates...............................       (10,142)           (7,063)          (20,667)
                Decrease (Increase) in other assets...........................       (36,825)             (582)          (19,241)
                (Decrease) Increase in accounts payable and accrued expenses..        33,232             5,278            54,072
                Increase (Decrease) in other liabilities......................          (676)            5,104            11,089
                                                                                  -----------    --------------     -------------
                    Net cash used in operating activities.....................       (94,851)         (374,849)         (583,336)
                                                                                  -----------    --------------     -------------
CASH FLOWS FROM INVESTING ACTIVITIES :
    Purchases of property and equipment.......................................        (4,189)          (15,954)          (39,209)
    Additions to system under construction....................................      (614,045)         (365,386)       (3,456,821)
                                                                                  -----------    --------------     -------------
                    Net cash used in investing activities.....................      (618,234)         (381,340)       (3,496,030)
                                                                                  -----------    --------------     -------------
CASH FLOWS FROM FINANCING ACTIVITIES :
    Net proceeds from issuance of Class 1 and Class 2 Interests...............       283,666             3,346         1,935,665
    Net proceeds from issuance of senior notes and warrants...................       745,939           341,742         1,619,384
    Borrowings under guaranteed bank line of credit...........................       410,000           346,500         1,506,500
    Payments under guaranteed bank line of credit.............................      (680,000)         (285,000)       (1,235,000)
    Borrowings under senior secured line of credit............................             -            60,000           410,000
    Decrease in restricted cash...............................................             -           350,220                 -
    Deferred financing costs..................................................       (39,220)           (4,452)          (91,976)
                                                                                  -----------    --------------     -------------
                    Net cash provided by financing activities.................       720,385           812,356         4,144,573
                                                                                  -----------    --------------     -------------
Increase in cash and cash equivalents.........................................         7,300            56,167            65,207

CASH AND CASH EQUIVALENTS, beginning of period................................         1,889             9,040                 -
                                                                                  -----------    --------------     -------------
CASH AND CASH EQUIVALENTS, end of period......................................   $     9,189    $       65,207     $      65,207
                                                                                  ===========    ==============     =============
</TABLE>


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

                                       12
<PAGE>   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
substantially all of their efforts to establishing 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 19.3% as of September 30, 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.


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 September 30, 1998, and the
results of their operations for the three and nine month periods ended
September 30, 1998 and 1997, and the period from June 14, 1991 (inception)
through September 30, 1998, and their cash flows for the nine month periods
ended September 30, 1998 and 1997, and the period from June 14, 1991
(inception) through September 30, 1998.  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,
1998 are not necessarily indicative of the results of operations expected in
the future, although the Parent continued 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 thereto included in the Annual Report on Form 10-K.





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

        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



3.       MEMBERS' EQUITY

         The Parent declared approximately $1,553,000 and $1,317,000 of in-kind
dividends to holders of Series A Class 2 Membership Interests during the three
month periods ended September 30, 1998 and 1997, respectively, and $4,499,000
and $4,924,000 for the nine month periods ended September 30, 1998 and 1997,
respectively.

NOMAD PROGRAM

         The Parent, in conjunction with IWCL, has commenced a NOMAD 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 September 30, 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 1 Interests.  The shares were recognized 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 as license costs.  During the nine months ended
September 30, 1998, $424,000 was capitalized to license costs under this
program.  No amounts were capitalized during the nine months ended September
30, 1997.

4.       SUPPLEMENTAL CASH FLOW INFORMATION

         During the nine months ended September 30, 1998 and 1997, $247,438,000
and $80,970,000, respectively, of interest costs were incurred.  Interest
expensed for the nine months ended September 30, 1998 was $168,169,000 with the
remaining interest capitalized to the system under construction.  For the nine
months ended September 30, 1997, all interest expense was capitalized to the
system under construction.  Interest paid was $181,422,000 and $24,344,000
during the nine months ended September 30, 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, among the Parent, Iridium and Motorola, pursuant
to which Motorola guaranteed Iridium's obligations under the Guaranteed Bank
Facility, an additional 9,209 and 56,416 warrants to purchase 690,675 and
4,231,200 Class 1 Interests, respectively, were earned by Motorola during the
nine months ended September 30,1998 and 1997, respectively. The Parent
recognized $8,344,000 and $48,631,000 as expense during the nine months ended
September 30, 1998 and 1997, respectively, in connection with the warrants
earned by Motorola.  Warrant expense for the three months ended September 30,
1998 and 1997 was $459,000 and $13,364,000, respectively.

         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, the Parent and Iridium have the
option to compensate Motorola for its Guarantee by having the Parent continue
to pay warrant compensation at the existing rate or (i) having Iridium pay
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 plus (ii) having the Parent pay
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").  Interest incurred on the guaranteed amount was $5,094,000 and
$7,927,000 for the three and nine months ended September 30, 1998,
respectively.

         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
is expected to earn as compensation for their guarantee of that facility from
inception until the expected maturity in June 1999 is 104,229 warrants to
purchase approximately 7,817,000 Class 1 Interests (assuming Iridium and Parent
pay High Yield Compensation,





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

        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



including interest on the guaranteed amount, through maturity).

         Currently, Iridium and the Parent have elected to pay Motorola High
Yield Compensation.  While the Parent and Iridium expect 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.

STANDBY PURCHASE AGREEMENT

         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, Parent has signed with Motorola and intends to enter
into with Kyocera Corporation, standby commitments to purchase an aggregate of
up to $400 million in subscriber equipment.  The Motorola commitment 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, and the Kyocera commitment is expected to
contain similar provisions triggered on or after February 8, 1999.

6.       LONG TERM DEBT

         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.

7.       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 and nine months ended
September 30, 1998, the impact of other potentially dilutive securities is
anti-dilutive and is not included in the diluted earnings (loss) per Class 1
Interest calculations.

8.       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 are as
follows:

<TABLE>
<CAPTION>
                                                           THREE MONTHS             NINE MONTHS
                                                      ENDED SEPTEMBER 30,       ENDED SEPTEMBER 30,
                                                     -----------------------   -----------------------
                                                        1997        1998         1997         1998
                                                     ----------   ----------   ----------   ----------
<S>                                                   <C>         <C>          <C>         <C>
Comprehensive income (loss):

Net loss, as reported . . . . . . . . . . . . .        $(84,095)  $(364,381)   $(167,949)     $(812,722)
Other comprehensive income (loss) . . . . . . .               -           -            -              -
                                                       --------   ---------    ---------      ---------

Total . . . . . . . . . . . . . . . . . . . . .        $(84,095)  $(364,381)   $(167,949)     $(812,722)
                                                       ========   =========    =========      =========


Accumulated other comprehensive income (loss):

Beginning of period . . . . . . . . . . . . . .
                                                       $   (733)  $    (643)   $    (733)     $    (643)
                                                       ========   =========    =========      =========
End of period . . . . . . . . . . . . . . . . .
                                                       $   (733)  $    (643)   $    (733)     $    (643)
                                                       ========   =========    =========      =========
</TABLE>





                                       15
<PAGE>   16
                                  IRIDIUM LLC
                (A Development Stage Limited Liability Company)

        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



9.       IRIDIUM SUBSIDIARIES

         Iridium Promotions, Inc. ("Promotions"), a Delaware Corporation and a
wholly-owned subsidiary of the Parent, was formed on September 11, 1998.
Iridium Geolink LLC  ("Geolink"), a Delaware limited liability company and a
wholly-owned subsidiary of the Parent, was formed on August 25, 1998.
Promotions and Geolink have no assets or liabilities and have not engaged in
any business activities.





                                       16
<PAGE>   17
                             IRIDIUM OPERATING LLC
                  ( A Wholly-Owned Subsidiary of Iridium LLC )
               ( A Development Stage Limited Liability Company )

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                ( In Thousands )

<TABLE>
<CAPTION>
                                                                                            September 30,
                                                                          December 31,           1998
                                                                              1997           (Unaudited)
                                                                           ----------         ----------
<S>                                                                       <C>                <C>        
                                     ASSETS
Current assets :
    Cash and cash equivalents ........................................    $     5,940        $    65,207
    Restricted cash ..................................................        350,220                  -
    Due from affiliates ..............................................         13,604             20,667
    Prepaid expenses and other current assets ........................          6,612             18,407
                                                                           ----------         ----------
        Total current assets .........................................        376,376            104,281
Property and equipment, net ..........................................      1,526,326          2,865,070
System under construction ............................................      1,625,054            523,739
Other assets .........................................................        114,831             70,964
                                                                           ----------         ----------
        Total assets .................................................    $ 3,642,587        $ 3,564,054
                                                                           ==========         ==========

                        LIABILITIES AND MEMBER'S EQUITY
Current liabilities :
    Accounts payable and accrued expenses ............................    $   106,794        $   101,036
    Accounts payable to Parent's Members .............................         10,601            221,765
    Bank facilities, current portion .................................        350,000            681,500
                                                                           ----------         ----------
        Total current liabilities ....................................        467,395          1,004,301
Bank facilities, net of current portion ..............................        210,000                  -
Long-term debt due to Parent's Members ...............................        273,302            310,149
Notes payable, $1,450,000 principal amount as of September 30, 1998 ..      1,054,288          1,404,742
Other liabilities ....................................................          6,065             11,169
                                                                           ----------         ----------
        Total liabilities ............................................      2,011,050          2,730,361
                                                                           ----------         ----------

Commitments and Contingencies
Member's equity :
    Member's Interest ................................................      2,059,421          2,074,087
    Deficit accumulated during the development stage .................       (427,241)        (1,239,751)
    Adjustment for minimum pension liability .........................           (643)              (643)
                                                                           ----------         ----------
        Total member's equity ........................................      1,631,537            833,693
                                                                           ----------         ----------
        Total liabilities and member's equity ........................    $ 3,642,587        $ 3,564,054
                                                                           ==========         ==========
</TABLE>



  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.
                                       17
<PAGE>   18
                             IRIDIUM OPERATING LLC
                  ( A Wholly-Owned Subsidiary of Iridium LLC )
               ( A Development Stage Limited Liability Company )

              UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                                                    PERIOD FROM
                                                                                                                   JUNE 14, 1991
                                                                                                                 (INCEPTION) THROUGH
                                            THREE MONTHS ENDED SEPTEMBER 30,    NINE MONTHS ENDED SEPTEMBER 30,  SEPTEMBER 30, 1998
                                            --------------------------------    -------------------------------  ------------------
                                                 1997              1998             1997              1998
                                              ---------         ---------        ---------         ---------
<S>                                          <C>               <C>              <C>               <C>              <C>
OPERATING EXPENSES
    Sales, general and administrative ....   $   39,023        $  129,018       $  122,888        $  261,049       $  574,198
    Depreciation and amortization ........       45,936           152,627           46,539           378,276          499,705
                                              ---------         ---------        ---------         ---------        ---------
        Total operating expenses .........       84,959           281,645          169,427           639,325        1,073,903
OTHER INCOME
    Interest expense (income), net .......         (902)           82,655           (1,516)          173,185          157,877
                                              ---------         ---------        ---------         ---------        ---------
Loss before provision for income taxes ...       84,057           364,300          167,911           812,510        1,231,780
Provision for income taxes ...............            -                 -                -                 -            7,971
                                              ---------         ---------        ---------         ---------        ---------
Net loss .................................   $   84,057        $  364,300       $  167,911        $  812,510       $1,239,751
                                              =========         =========        =========         =========        =========
</TABLE>



  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.
                                       18
<PAGE>   19
                             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 )

<TABLE>
<CAPTION>
                                                                                                                
                                                                                         NINE MONTHS ENDED          PERIOD FROM    
                                                                                           SEPTEMBER 30,           JUNE 14, 1991   
                                                                                  ----------------------------- (INCEPTION) THROUGH
                                                                                     1997               1998     SEPTEMBER 30, 1998
                                                                                  ----------         ----------  ------------------
<S>                                                                              <C>                   <C>           <C>         
CASH FLOWS FROM OPERATING ACTIVITIES :
    Net loss .................................................................   $  (167,911)          (812,510)     $(1,239,751)
    Adjustments to reconcile net loss to net cash
        used in operating activities -
            Depreciation and amortization ....................................        46,539            378,276          499,705
            Interest converted to additional debt ............................             -             52,570           52,570
            Expense recognized for warrants issued in
               connection with debt guarantee ................................        48,631              8,344           89,678
            Loss on disposal of assets .......................................             -                  -               87
            Changes in assets and liabilities:
                Increase in prepaid expenses and other current assets ........        (7,699)            (4,266)         (10,878)
                Increase in due from affiliates ..............................       (10,142)            (7,063)         (20,667)
                Decrease (Increase) in other assets ..........................       (36,825)              (582)         (19,241)
                (Decrease) Increase in accounts payable and accrued expenses .        33,232              5,278           54,072
                Increase (Decrease) in other liabilities .....................          (676)             5,104           11,089
                                                                                  ----------         ----------       ----------
                    Net cash used in operating activities ....................       (94,851)          (374,849)        (583,336)
                                                                                  ----------         ----------       ----------

CASH FLOWS FROM INVESTING ACTIVITIES :
    Purchases of property and equipment ......................................        (4,189)           (15,954)         (39,209)
    Additions to system under construction ...................................      (614,045)          (365,386)      (3,456,821)
                                                                                  ----------         ----------       ----------
                    Net cash used in investing activities ....................      (618,234)          (381,340)      (3,496,030)
                                                                                  ----------         ----------       ----------

CASH FLOWS FROM FINANCING ACTIVITIES :
    Net proceeds from issuance of Parent's Class 1 and Class 2 Interests .....       283,666              3,346        1,935,665
    Net proceeds from issuance of senior notes and warrants ..................       745,939            341,742        1,619,384
    Borrowings under guaranteed bank line of credit ..........................       410,000            346,500        1,506,500
    Payments under guaranteed bank line of credit ............................      (680,000)          (285,000)      (1,235,000)
    Borrowings under senior secured line of credit ...........................             -             60,000          410,000
    Decrease in restricted cash ..............................................             -            350,220                -
    Deferred financing costs .................................................       (39,220)            (4,452)         (91,976)
    Transfer from Parent .....................................................             -              3,100                -
                                                                                  ----------         ----------       ----------
                    Net cash provided by financing activities ................       720,385            815,456        4,144,573
                                                                                  ----------         ----------       ----------

Increase in cash and cash equivalents ........................................         7,300             59,267           65,207

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

CASH AND CASH EQUIVALENTS, end of period .....................................   $     9,189        $    65,207      $    65,207
                                                                                  ==========         ==========       ==========
</TABLE>



  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.
                                       19
<PAGE>   20
                             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 substantially all of its efforts to
establishing 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 19.3% as of September 30, 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.

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, 1998, and the results
of their operations for the three and nine month periods ended September 30,
1998 and 1997, and the period from June 14, 1991 (inception) through September
30, 1998, and their cash flows for the nine month periods ended September 30,
1998 and 1997, and the period from June 14, 1991 (inception) through September
30, 1998.  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, 1998 are not necessarily
indicative of the results of operations expected in the future, although
Iridium continued 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 Iridium's audited
consolidated financial statements and footnotes thereto included in the Annual
Report on Form 10-K.

3.       SUPPLEMENTAL CASH FLOW INFORMATION

         During the nine months ended September 30, 1998 and 1997, $247,438,000
and $80,970,000, respectively, of interest costs were incurred.  Interest
expensed for the nine months ended September 30, 1998 was $168,169,000 with

                                       20
<PAGE>   21

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

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the remaining interest capitalized to the system under construction.  For the
nine months ended September 30, 1997, all interest expense was capitalized to
the system under construction.  Interest paid was $181,422,000 and $24,344,000
during the nine months ended September 30, 1998 and 1997, respectively.

4.       TRANSACTIONS WITH MEMBERS OF THE PARENT

GUARANTEED BANK FACILITY

         In accordance with the Second Amended and Restated Agreement Regarding
Guarantee, dated May 11, 1998, among Iridium, the Parent and Motorola, pursuant
to which Motorola guaranteed Iridium's obligations under the Guaranteed Bank
Facility, an additional 9,209 and 56,416 warrants to purchase 690,675 and
4,231,200 Class 1 Interests, respectively, were earned by Motorola during the
nine months ended September 30,1998 and 1997, respectively.  The Parent
recognized $8,344,000 and $48,631,000 as expense during the nine months ended
September 30, 1998 and 1997, respectively, in connection with the warrants
earned by Motorola.  Warrant expense for the three months ended September 30,
1998 and 1997 was $459,000 and $13,364,000, respectively.

         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, the Parent and Iridium have the
option to compensate Motorola for its Guarantee by having the Parent continue
to pay warrant compensation at the existing rate or (i) having Iridium pay
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) having
Parent pay 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"). Interest incurred on the guaranteed amount were
$5,094,000 and $7,927,000 for the three and six months ended September 30,
1998, respectively.

         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
is expected to earn as compensation for their guarantee of that facility from
inception until the expected maturity in June 1999 is 104,229 warrants to
purchase approximately 7,817,000 Class 1 Interests (assuming Iridium and the
Parent pay High Yield Compensation, including interest on the guaranteed
amount, through maturity).

         Currently, Iridium and the Parent have elected to pay Motorola High
Yield Compensation.  While Iridium and the Parent expect 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.

STANDBY PURCHASE AGREEMENT

         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 has entered into with Motorola and intends to
enter into with Kyocera Corporation, standby commitments to purchase an
aggregate of up to $400 million in subscriber equipment.  The Motorola
commitment 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, and the Kyocera
commitment is expected to contain similar provisions triggered on or after
February 8, 1999.





                                       21
<PAGE>   22

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

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


5.       LONG TERM DEBT

         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.

6.       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 are as
follows:

<TABLE>
<CAPTION>
                                                              THREE MONTHS                NINE MONTHS
                                                           ENDED SEPTEMBER 30,        ENDED SEPTEMBER 30,
                                                         -----------------------    -----------------------
                                                             1997         1998         1997         1998
                                                         -----------  -----------   ----------   ----------
    <S>                                                   <C>         <C>           <C>          <C>
    Comprehensive income (loss):
    Net loss, as reported . . . . . . . . . . . . .       $(84,057)    $(364,300)   $(167,911)   $(812,510)
    Other comprehensive income (loss) . . . . . . .              -             -             -           -
                                                         -----------  ----------      --------   ---------
    Total . . . . . . . . . . . . . . . . . . . . .       $(84,057)    $(364,300)   $(167,911)   $(812,510)
                                                          =========    ==========   ==========   ==========

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

</TABLE>

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 and Iridium Facilities Canada Inc., the
"Iridium Subsidiaries"). Each of the Iridium Subsidiaries is a wholly-owned
subsidiary of Iridium and, as of September 30, 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 and
Iridium Facilities Canada Inc. were formed by Iridium on February 6, 1998 and
March 19, 1998, respectively.





                                       22
<PAGE>   23

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

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


         The following is summarized financial information of Capital as of
September 30, 1998 and for the period from inception through September 30,
1998. Full financial statements of Capital are not presented because management
believes they are not material to investors.

<TABLE>
<CAPTION>
                                                                       SEPTEMBER 30, 1998
                                                                       ------------------
         <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, 1998
                                                                   -----------------------
         <S>                                                                  <C>
         Net revenues  . . . . . . . . . . . . . . . . . . . .                $0
         Cost of services  . . . . . . . . . . . . . . . . . .                 0
         Net loss  . . . . . . . . . . . . . . . . . . . . . .                 0
</TABLE>

         Iridium has recognized the obligations relating to the Senior Notes
and Series D Notes because Iridium expects to have the operations to service
such obligations.

         The following is summarized financial information of the Guarantor
Subsidiaries and Iridium Facilities Canada Inc. as of September 30, 1998, and
for the period from inception of each of the Guarantor Subsidiaries and Iridium
Facilities Canada Inc.  through September 30, 1998. Full financial statements
of the Guarantor Subsidiaries and Iridium Facilities Canada Inc. are not
presented because management believes they are not material to investors.


<TABLE>
<CAPTION>
                                                                       SEPTEMBER 30, 1998
                                                                       ------------------
         <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, 1998
                                                                   -----------------------
        <S>                                                                  <C>
        Net revenues  . . . . . . . . . . . . . . . . . . . .                $0
        Cost of services  . . . . . . . . . . . . . . . . . .                 0
        Net loss  . . . . . . . . . . . . . . . . . . . . . .                 0
</TABLE>




                                       23

<PAGE>   24
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"), Iridium IP
LLC ("IP") and Iridium Facilities Corporation ("Facilities"). IWCL acts as a
member of the Parent and has no other business.  The business of Iridium
constitutes substantially all of the business of the Parent.  Capital, Roaming,
IP, and Facilities are wholly-owned subsidiaries of Iridium.

FORWARD LOOKING STATEMENTS

   Iridium is currently transitioning from a development stage company to an
operating company and has no meaningful operating history.  Many of the
statements in this report are forward looking and actual results may be
materially different from those expressed or implied by these statements. 
Forward looking statements are based on a number of assumptions, and one or
more of these assumptions is likely to be incorrect.  Examples of forward
looking statements include statements concerning: expected funding needs, the
satellite maintenance launch schedule, the expected progress of improvements
and software enhancements, expected operational and software improvements, the
transition to commercial service, Iridium's expectations regarding Year 2000
issues and the integration and compliance testing of service providers and
roaming partners.  
                             
   Factors which may cause IWCL's, Parent's or Iridium's results to differ
materially from those expressed or implied by such forward looking statements
and other factors that may materially affect Iridium's operations, are
described in greater detail in Exhibit 99 to this Report -- "Certain Factors
Which May Affect Iridium" -- and should be carefully considered by investors
and prospective investors in IWCL, Parent or Iridium.
                                     
BACKGROUND

   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 November 9, 1998, IWCL
owned 12,179,485 Class 1 Membership Interests in Parent (approximately 8.6% of
the amount outstanding).        

   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, has the same purpose as Parent and acts as the main operating
company in the Iridium group.

   Iridium has four series of Senior Notes outstanding: its 13% Senior Notes
due 2005, Series A/EN ("Series A Notes"), its 14% Senior Notes due 2005, Series
B/EN ("Series B Notes"), its 11 1/4% Senior Notes due 2005, Series C and Series
C/EN ("Series C Notes"), and its 10 7/8% Senior Notes due 2005, Series D
("Series D Notes", and, together with its Series A Notes, Series B Notes and
Series C Notes, the "Senior Notes").  Iridium's Senior Notes are co-issued by
Capital and guaranteed by Roaming, IP and Facilities.





                                       24
<PAGE>   25

   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 Senior
Notes 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. Facilities, a Delaware
corporation and a wholly-owned subsidiary of Iridium, holds certain real
property of Iridium.  Each of Roaming, IP and Facilities is a guarantor of the
Senior Notes and the Secured Bank Facility.

   IWCL's sole assets are its Class 1 Membership Interests, and warrants to
purchase additional Class 1 Membership Interests of Parent upon the exercise of
outstanding IWCL warrants. 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. The business of Iridium
constitutes substantially all of Parent's business. Accordingly, this
discussion focuses on the financial condition and results of operations of
Iridium.

RECENT DEVELOPMENTS

   Iridium began commercial satellite phone service on November 1, 1998.

   During the third quarter, Iridium successfully launched seven additional
satellites aboard two launch vehicles.  Three of the seven new satellites
filled gaps in the operational constellations, while the other four will serve
as spares for future constellation replenishment.  Satellite maintenance
launches are expected on an on-going basis during commercial operations.

   During the third quarter, Iridium's ground control facilities became
commercially operational and 12 gateways were staffed and began functioning. 
Internal and customer trials were conducted during the third quarter, which
were designed to test the system design, architecture and service features.
Constellation software was uploaded throughout the network and test results
demonstrated improvements in system performance, including L-band availability,
cross-link functionality, call establishment and completion, and dropped call
rates. Additional software enhancements may be required as the system matures
and commercial customers use the Iridium System.  While testing of paging
functionality was delayed due to concentration of efforts on voice performance,
Iridium intends to begin commercial satellite paging service on November 15,
1998.
                                
   Iridium phones and pagers are the first commercial products to carry the
newly approved International Telecommunications Union "mark", which is intended
to enable subscribers to carry Iridium phones and pagers into, and out of,
countries without restriction.  Iridium believes that this mark will enhance
the company's ability to deliver on its promise to provide global
communications services.
                                      
   More than 120 countries and territories have licensed Iridium World
Satellite Service, enabling satellite services to be offered in countries that
collectively account for approximately  75% of Iridium's expected market for
satellite services.

   Service provider and roaming partner integration and compliance testing have
been underway for several months.  As of November 1, 1998, Iridium had
integrated approximately 56 service providers and had completed compliance
testing for approximately 50 roaming partners.  Iridium has signed agreements
with a significant number of additional roaming partners that have not yet been
integrated and tested. Integration and compliance testing are necessary to
ensure proper signaling, interconnection, billing system interface, product
handling and marketing readiness.  In order to meet its distributor and roaming
partner goals, Iridium will need to make substantial progress in integration
and compliance testing.




                                                       
                                       25
<PAGE>   26
LIQUIDITY AND CAPITAL RESOURCES

FUNDING REQUIREMENTS

   Iridium commenced commercial satellite phone service on November 1, 1998.
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 September 30,
1997 and 1998, Iridium had expended, since inception, approximately $3.15
billion (or 57%) and approximately $4.18 billion (or 76%), respectively, of
such $5.5 billion estimate. While Iridium raised sufficient funds to meet its
pre-commercial operations project costs, Iridium expects to require an
additional approximately $1.7 billion in funding for refinancing, project costs
and operations prior to year-end 1999.  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 below).  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, 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. The
Terrestrial Network Development Contract provides for payments aggregating
approximately $321 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 Roaming Services into Iridium's
service offerings, there have been, and Iridium anticipates there will be,
amendments and interpretations of 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 September 30, 1998, Iridium incurred expenditures totaling $3.2
billion to Motorola under the Space System Contract in respect of completed
milestones and expenditures totaling $285 million under the Terrestrial Network
Development Contract. Based on estimates and the planned schedule as of
September 30, 1998, Iridium's expected future cash requirements by year under
the contracts through December 31, 1999 are approximately as follows (in
millions):           
<TABLE>
<CAPTION>
                                                                    1998      1999
                                                                   -----     -----
    <S>                                                            <C>      <C>
    Space System Contract  . . . . . . . . . . . . . . . . . .     $  332   $    -
    Terrestrial Network Development Contract . . . . . . . . .         79       87
    Operations and Maintenance Contract  . . . . . . . . . . .         86      537
</TABLE>

   Iridium will also require funds for working capital, business software
development, interest on anticipated borrowings, financing costs and operating
expenses.





                                       26
<PAGE>   27

     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 has entered into with Motorola, and intends to
enter into with Kyocera Corporation, standby commitments to purchase an
aggregate of up to $400 million in subscriber equipment (the "Standby Equipment
Purchase Commitments").  The Motorola Commitment 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, and the Kyocera Commitment is expected to contain similar
provisions triggered on or after February 8, 1999.  See "SOURCES OF FUNDING."

   Iridium's interest expense will increase significantly as a result of its
financing plan.  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 commercial service, 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 September 30, 1998, Iridium had indirectly received $1.94 billion from
equity investments in the Parent, and has the right to receive approximately
$52 million due from South Pacific Iridium Holdings Limited pursuant to the
terms of a definitive purchase agreement. As of September 30, 1998 Iridium's
indebtedness for borrowed money equaled approximately $2.4 billion, including
approximately $1.4 billion in aggregate principal amount of Senior Notes (as
defined), approximately $310 million in aggregate principal amount of 14 1/2%
Senior Subdinated Notes due 2006, approximately $271.5 million of borrowings
under the Guaranteed Bank Facility (as defined) and approximately $410 million
of borrowings under the Secured Bank Facility (as defined).           

   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 September 30, 1998, Iridium had drawn $410
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 until the Iridium System meets certain
commercial service conditions. 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). The $1.0 billion Secured Bank Facility matures on
December 31, 1998 and, accordingly, Iridium is required to refinance the
outstanding amount of the Secured Bank Facility by that date.  

   Iridium is exploring several options for refinancing the Secured Bank
Facility.  However, there can be no assurance that Iridium will obtain such
replacement financing.  Failure to obtain replacement financing for the Secured
Bank Facility would have a material adverse effect on Iridium.  Iridium
estimates that in addition to raising replacement financing in the amount of
$1.0 billion for the Secured Bank Facility, it will need to raise an additional
$700 million to operate through 1999, the last year in which Iridium projects
negative cash flow and a net increase in year end borrowing. Iridium's estimated
funding needs may increase, perhaps substantially, for a number of reasons,
including if Iridium is unable to generate revenues in the amount and within the
time frame it expects or if Iridium has unexpected cost increases.  Such
additional and replacement financing may be secured or guaranteed in whole or in
part.  There is a risk that Iridium may not be able to find banks or any other
lender that will be willing to lend to Iridium on terms it will accept.

   As of September 30, 1998, Iridium had drawn $271.5 million under a $275
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").  Depending on market conditions,
Iridium may make additional senior note offerings in order to further reduce
the Guaranteed Bank Facility or for other purposes.  However, there can be no
assurance that Iridium will be able to complete additional senior note
offerings even if favorable market conditions exist.  The Guaranteed Bank
Facility matures on June 30, 1999.

     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 and (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
Commitment 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 currently 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. However, there are many factors that
could affect the availability of such a credit facility, and there can be no
assurance that the bank lenders would agree, if so requested by Iridium, to
increase the amount of the Guaranteed Bank Facility or to extend the term of the
Guaranteed Bank Facility.





                                       27
<PAGE>   28
               
OPERATIONS

   Iridium commenced commercial satellite phone service on November 1, 1998. As
of September 30, 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 interest income amounted to approximately $21.2 million from July
29, 1993 (the "Initial Capital Contribution Date") to September 30, 1998.
During the same period, Iridium recorded a net loss of approximately $1.253
billion. 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.   

     From September 30, 1997 to September 30, 1998, Iridium's aggregate net loss
increased substantially from $168 million to $813 million for the nine months
ended September 30, 1997 and 1998, respectively.  This was primarily the result
of the following increases for the nine months ended September 30, 1998,
as compared to the corresponding period in 1997:  $138 million for sales,
general and administrative expenses due to increased activities associated with
commercial activation, $331 million for depreciation expense due to the
depreciation of a greater number of satellites and $176 million for increased
interest expense. See "CAPITALIZATION OF COSTS", "OPERATING EXPENSES" and
"INTEREST EXPENSE."                        

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 $3.45 billion through September 30, 1998. In
addition, costs incurred in connection with the issuance by Parent of





                                       28
<PAGE>   29
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.

   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 as incurred.

OPERATING EXPENSES

   For the period from the Initial Capital Contribution Date through September
30, 1998, total operating expenses were approximately $1.06 billion. 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 nine months ended September 30, 1998, approximately $247.4
million of interest cost was incurred. Interest expensed for the nine months
ended September 30, 1998 was approximately $168.2 million 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.

YEAR 2000 READINESS DISCLOSURE STATEMENT


  Iridium has established a Year 2000 Program (the "Y2K Program") to address
information-technology ("IT") and non-IT problems that may exist within the
Iridium System, including Iridium's suppliers, roaming partners, service
providers and other material distributors.

  Until recently, only two digits were used to represent the year in dates
recorded in computer systems.  This practice did not anticipate the problem
generated by the turn of the century, after which dates entered as "00" could
be understood by computers to mean 1900 instead of 2000.  This and other date
handling processes could result in the incorrect performance of computer
calculations and functionality involving dates.  Such miscalculations could
adversely affect Iridium's installed computer systems, network elements,
software applications and other business systems containing time sensitive
programs.  The Year 2000 issue may also affect the systems and applications of
Iridium's roaming partners, service providers and other material distributors.

           





                                       29
<PAGE>   30
Y2K Program

  The Y2K Program encompasses the Iridium space and ground facilities, as well
as the relevant operations of Iridium's material suppliers and distributors,
and addresses both IT and non-IT systems.

  The Y2K Program is divided into five major phases - Awareness, Inventory and
Risk Assessment, Repair and Renovation, Verification and Validation, and
Implementation and Monitoring.  The Awareness Phase is intended to ensure the
establishment of the Y2K Program and the awareness of potential risks and Year
2000 issues.  This phase, which involves communicating the status and progress
of the Y2K Program within Iridium and to third parties, is an on-going activity
and will continue as Iridium proceeds through the other phases.

  The Inventory and Risk Assessment Phase involves the performance of an
initial inventory of all Iridium hardware, software and infrastructure, as well
as material vendors, to identify potential Year 2000 issues and to determine
the action required, if any, to mitigate the risk to Iridium. Through the
gateways, Iridium is contacting its third party roaming partners and service
providers to determine the Year 2000 status of their systems, as well as their
plans to bring them into compliance.  That process is on-going.  Material items
are those believed by Iridium to have a significant impact on the business from
a customer service, financial or legal perspective. This phase is being
performed by Iridium's internal Y2K team.  Iridium anticipates that this phase
will be substantially complete by the end of the first quarter in 1999.

  The Repair, Replacement and Renovation Phase is intended to ensure that the
appropriate items as identified in the final inventory and risk assessment are
upgraded to meet Year 2000 compliance criteria.  This may include software
updates, hardware upgrades, development of new processes, new business
practices, training programs, etc.  While completion of the various elements of
this phase is tied to corresponding elements within the assessment phase,
Iridium anticipates that material repairs, replacements and renovations will be
substantially complete by mid-1999 for systems under the direct control of
Iridium.  No current assessment of the completion dates for material repairs,
replacements and renovations not under Iridium's direct control, and for which
third parties such as gateways, service providers and roaming partners are
responsible, will be available until completion of that portion of the
Inventory and Risk Assessment phase.

     The Verification and Validation Phase ensures that critical business
processes, systems and infrastructure are verified and tested to ensure Year
2000 issues will not cause major disruption in the on-going operation of the
Iridium business. Verification and testing of those systems under Iridium's
direct control will be performed by Iridium's internal Y2K team with the support
of its technicians and certain of the principal suppliers of those systems.
This phase is ongoing, but Iridium expects all testing of those systems under
its direct control to be substantially complete in the third quarter of 1999.

  Finally, during the Implementation and Monitoring Phase, the Year 2000
upgrades will be installed into Iridium's operating systems, as necessary.  In
addition, the monitoring activity will be employed in an effort to ensure that
unforeseen Year 2000 critical items are appropriately prioritized for
correction.  While the implementation component of this phase is scheduled to
be complete by the end of the third quarter in 1999, Iridium's monitoring
activities will be on-going.

State of Readiness

  While there is general uncertainty inherent in the Year 2000 problem
resulting in part from the uncertainty of the readiness of third party
distributors and vendors, Iridium's progress towards completing risk assessment
within the Iridium System is on schedule to be completed in the first quarter
1999.

  Although the remediation, testing and implementation phases have not yet
commenced, Iridium anticipates that these phases will proceed along the
schedule as contemplated by its Y2K Program.

Costs

  The total cost associated with required modifications to become Year 2000
compliant is not expected to be material to Iridium's financial position or
results of operations.  The current estimated total cost to





                                       30
<PAGE>   31
Iridium of the Y2K Program is $2 million.  However, the accuracy of this
estimate cannot be verified until completion of the Inventory and Risk
Assessment Phase. Factors which may affect this $2 million estimate include
unanticipated problems with Iridium's systems or any of its suppliers' or
distribution partners' systems. Iridium estimates that the amount expended on
the Y2K Program through December 31, 1998, will be approximately $304,000, all
of which will be expensed by Iridium, with $24,000 of this amount incurred in
the first nine months of 1998.  This estimate does not reflect all costs
because, for example, the Iridium Business Support Systems were developed from
the outset to handle Year 2000 issues, and the cost of this capability was not
separately identified by the supplier.  Other significant or critical non-Year
2000 information technology projects under Iridium's direct control have not
been materially delayed or impacted by Year 2000 initiatives.

Risks

     In a reasonably likely worst case scenario, the failure to correct a
material Year 2000 problem could result in an interruption in, or a failure of,
certain normal business activities or operations, including operations that
are essential to the provision of Iridium's services.  Such failures could
materially and adversely affect Iridium's results of operations, liquidity and
financial condition.  Due to the general uncertainty inherent in the Year 2000
problem, resulting in major part from the present state of Iridium's knowledge
concerning the Year 2000 readiness of third-parties such as its roaming partners
and service providers, Iridium is unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on Iridium's
results of operations, liquidity or financial condition.  The Y2K Program is
expected to significantly reduce Iridium's level of uncertainty about the Year
2000 problem and, in particular, about the Year 2000 compliance and readiness of
its material partners.  Iridium believes that, with the completion of the Y2K
Program as scheduled, the potential of significant interruptions of normal
operations should be reduced.

Contingency Plans

  After reviewing information gathered in the Inventory and Risk Assessment
Phase, and to prepare for the possibility that certain information systems or
third party partners and vendors will not be Year 2000 compliant, Iridium
intends to develop contingency plans, as appropriate.

  These plans may include the establishment of teams to monitor and correct
disruptions, utilization of back-up processes including data back-up and
storage, and the development of manual "work-around" solutions.

  Readers are cautioned that the discussion of Iridium's efforts and
expectations related to Year 2000 are forward-looking statements and should be
read in conjunction with Iridium's disclosures under "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Forward Looking
Statements", as well as Exhibit 99 to this Report -- "Certain Factors Which May
Affect Iridium."                                                





                                       31
<PAGE>   32

   ITEM 3.           QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 
   Not Applicable


                                      32
<PAGE>   33
PART II     OTHER INFORMATION

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

               10             Amendment Number 7 to the Iridium Space System
                              Contract and Amendment Number 5 to the Terrestrial
                              Network Development Contract

               11.1           Computation of Loss Per Class A Common Share

               11.2           Computation of Loss per Class 1 Interest

               27.1           Financial Data Schedule of Iridium LLC

               27.2           Financial Data Schedule of Iridium Operating
                              LLC

               27.3           Financial Data Schedule of Iridium World
                              Communications Ltd.

               99             Certain Factors Which May Affect Iridium

            (b)    Reports on Form 8-K

                   During the quarter, Iridium filed one report on Form 8-K 
                   dated September 9, 1998, which reported a press release 
                   relating to a delay of the launch of commercial service to 
                   November 1, 1998.




                                     33
<PAGE>   34
                                   SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, each of the registrants has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized:


                                IRIDIUM WORLD COMMUNICATIONS LTD.
                                
                                
                                /s/ Edward F. Staiano
                                ---------------------
                                Dr. Edward F. Staiano
                                Chairman and Chief Executive Officer
                                
                                
                                /s/ Roy T. Grant
                                ----------------
                                Roy T. Grant
                                Vice President and Chief Financial Officer
                                
                                
                                IRIDIUM LLC
                                
                                
                                /s/ Edward F. Staiano
                                ---------------------
                                Dr. Edward F. Staiano
                                Vice Chairman and Chief Executive Officer
                                
                                
                                /s/ Roy T. Grant
                                ----------------
                                Roy T. Grant
                                Vice President and Chief Financial Officer
                                
                                
                                IRIDIUM OPERATING LLC
                                
                                
                                /s/ Edward F. Staiano
                                ---------------------
                                Dr. Edward F. Staiano
                                Vice Chairman and Chief Executive Officer
                                
                                
                                /s/ Roy T. Grant
                                ----------------
                                Roy T. Grant
                                Vice President and Chief Financial Officer
                                
                                
                                IRIDIUM CAPITAL CORPORATION
                                
                                
                                /s/ Edward F. Staiano
                                ---------------------
                                Dr. Edward F. Staiano
                                Chairman and Chief Executive Officer
                                
                                
                                /s/ Roy T. Grant
                                ----------------
                                Roy T. Grant
                                Chief Financial Officer
                                
                                
                                IRIDIUM IP LLC
                                
                                
                                /s/ Edward F. Staiano
                                ---------------------
                                Dr. Edward F. Staiano
                                acting chief executive
                                officer
                                
                                
                                /s/ Roy T. Grant
                                ----------------
                                Roy T. Grant
                                acting chief financial officer
                                




                                     34
<PAGE>   35
                                IRIDIUM ROAMING LLC
                                
                                
                                /s/ Edward F. Staiano
                                ---------------------
                                Dr. Edward F. Staiano
                                acting chief executive
                                officer
                                
                                
                                /s/ Roy T. Grant
                                ----------------
                                Roy T. Grant
                                acting chief financial officer
                                
                                
                                IRIDIUM FACILITIES CORPORATION
                                
                                
                                /s/ Edward F. Staiano
                                ---------------------
                                Dr. Edward F. Staiano
                                Chairman and Chief Executive Officer
                                
                                
                                /s/ Roy T. Grant
                                ----------------
                                Roy T. Grant
                                Chief Financial Officer




Date:  November 10, 1998



                                     35
<PAGE>   36


                              INDEX TO EXHIBITS

<TABLE>
<CAPTION>
                                                                                                             SEQUENTIALLY
EXHIBIT                                                                                                        NUMBERED
NUMBER                                                  DESCRIPTION OF EXHIBIT                                   PAGE
------                                                  ----------------------                                   ----
<S>             <C>                                                                                               <C>
10              Amendment Number 7 to the Iridium Space System
                Contract and Amendment Number 5 to the Terrestrial
                Network Development Contract                                                                        
                                                                                                                    
11.1            Computation of Loss Per Class A Common Share                                                        
                                                                                                                    
11.2            Computation of Loss per Class 1 Interest                                                            
                                                                                                                    
27.1            Financial Data Schedule of Iridium LLC                                                              
                                                                                                                    
27.2            Financial Data Schedule of Iridium Operating LLC                                                    
                                                                                                                    
27.3            Financial Data Schedule of Iridium World Communications Ltd.                                        

99              Certain Factors Which May Affect Iridium
</TABLE>





                                       36