UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-Q

(MARK ONE)

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

               FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998

                                       OR

    [ ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
        FOR THE TRANSITION PERIOD FROM ______________ TO _______________

                        COMMISSION FILE NUMBER: 000-23231

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

                      INNOVATIVE VALVE TECHNOLOGIES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                DELAWARE                                    76-0530346
    (STATE OR OTHER JURISDICTION OF                      (I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)                    IDENTIFICATION NO.)

    2 Northpoint Drive, Suite 300                            77060
             HOUSTON, TEXAS                               (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 925-0300

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

     Indicate by check mark whether the Registrant (1) has 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
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     The number of shares of Common Stock of the Registrant, par value $.001 per
share, outstanding at May 15, 1998 was 8,723,338.

=============================================================================
<PAGE>
                       INNOVATIVE VALVE TECHNOLOGIES, INC.

                 FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998

                                      INDEX

                                                                          PAGE
                                                                          -----
Part I -- Financial Information ..........................................  2
  Item 1 -- Financial Statements .........................................  2
     General Information .................................................  2
     Unaudited Pro Forma Combined Statements of Operations for the
      Three Months Ended March 31, 1997 and 1998 .........................  3
     Notes to Pro Forma Combined Statements of Operations(Unaudited)......  4
     Consolidated Balance Sheets as of December 31, 1997 and
      March 31, 1998 (Unaudited)..........................................  5
     Consolidated Statements of Operations for the Three Months
      Ended March 31, 1997 and 1998 (Unaudited) ..........................  6
     Consolidated Statements of Cash Flows for the Three Months Ended
      March 31, 1997 and 1998 (Unaudited) ................................  7
     Notes to Consolidated Financial Statements (Unaudited) ..............  8
  Item 2 -- Management's Discussion and Analysis of Financial
     Condition and Results of Operations ................................. 11
Part II -- Other Information ............................................. 14
  Item 2 - Changes in Securities and Use of Proceeds...................... 14
  Item 6 - Exhibits and Reports on Form 8-K ....... ...................... 15

                                        1
<PAGE>
                      INNOVATIVE VALVE TECHNOLOGIES, INC.

                        PART I -- FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

GENERAL INFORMATION

Introduction to Pro Forma Combined Statements of Operations.

     Innovative Valve Technologies, Inc. ("Invatec" or the "Company") was
incorporated in Delaware in March 1997 to create the leading single-source
provider of comprehensive maintenance, repair, replacement and value-added
distribution services for industrial valves and related process-system
components throughout North America. Except for its purchase of an established
business in July 1997, Invatec conducted no operations of its own prior to the
closing on October 28, 1997 of (i) its initial public offering (the "IPO") of
its common stock ("Common Stock"), (ii) its purchase of two established
businesses and (iii) a merger (the "SSI Merger") in which The Safe Seal Company,
Inc. ("SSI") became its subsidiary (Invatec, SSI and all businesses acquired as
of the IPO are collectively referred to herein as the "Founding Companies").
Earlier in 1997, SSI had purchased three established businesses. SSI and its
subsidiaries were affiliates of Invatec prior to the SSI Merger.

     Following the IPO, the Company acquired additional businesses in 1997 and
the first quarter of 1998 (these businesses, together with the businesses
acquired as of the IPO, are referred to herein as the "Acquired Businesses").
The Company accounted for the acquisitions of the Acquired Businesses in
accordance with the purchase method of accounting.

   The accompanying pro forma combined statements of operations of the Company
for the three months ended March 31, 1997 and 1998, respectively, include the
combined operations of the Founding Companies from January 1, 1997 and the other
Acquired Businesses from the date of their respective acquisition.

     The integration of the Acquired Businesses may present opportunities to
reduce other costs through the elimination of duplicative functions and
operating locations and the development of economies of scale. The Company
cannot currently quantify these anticipated savings and expects these savings
will be partially offset by incremental costs that the Company expects to incur,
but also cannot currently quantify accurately. The unaudited pro forma combined
financial information herein reflects neither unquantifiable expected savings
nor unquantifiable expected incremental costs. The pro forma adjustments are
based on preliminary estimates, available information and certain assumptions
that management deems appropriate.

                                       2
<PAGE>
              INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
                UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

These pro forma combined financial statements should be read in conjunction with
the unaudited interim historical consolidated financial statements of the
Company included elsewhere in this report.
 
                                                             THREE MONTHS
                                                             ENDED MARCH 31
                                                       ----------------- ------
                                                          1997          1998
                                                        Pro forma
                                                       -----------   ----------

REVENUES .........................................      $ 22,307       $ 33,504
COST OF OPERATIONS ...............................        15,981         22,548
                                                        --------       --------
     Gross profit ................................         6,326         10,956
SELLING, GENERAL AND ADMINISTRATIVE
  EXPENSES .......................................         5,478          8,059
                                                        --------       --------
     Income from operations ......................           848          2,897
OTHER INCOME (EXPENSE):
     Interest, net ...............................           (83)          (709)
     Other .......................................             8             13
                                                        --------       --------
INCOME FROM CONTINUING OPERATIONS BEFORE
  INCOME TAXES ...................................           773          2,201
PROVISION FOR INCOME TAXES .......................           332            946
                                                        --------       --------
INCOME FROM CONTINUING OPERATIONS ................      $    441       $  1,255
                                                        --------       --------
EARNINGS PER SHARE - BASIC .......................      $   0.06       $   0.16
                                                        ========       ========
EARNINGS PER SHARE - DILUTED .....................      $   0.06       $   0.15
                                                        ========       ========
WEIGHTED AVERAGE SHARES

 OUTSTANDING - BASIC .............................         7,824          8,029
                                                        ========       ========
WEIGHTED AVERGE SHARES

  OUTSTANDING - DILUTED ..........................         7,900          8,685
                                                        ========       ========




     The accompanying notes are an integral part of these pro forma combined
statements.

                                              3

NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS:

        The unaudited pro forma combined statements of operations present
historical information as adjusted to give effect to the following 1997 events
and transactions as if they had occurred on January 1, 1997: (i) the SSI Merger;
(ii) the acquisitions of the Founding Companies and the financings thereof;
(iii) certain reverse stock splits of outstanding stock; (iv) the IPO and
Invatec's application of its net proceeds therefrom; and (v) the issuance of
shares of Common Stock to repay certain of the Company's indebtedness. The
unaudited pro forma combined statements convert the results of operations of the
Acquired Businesses whose historical fiscal periods were not on a calendar-year
basis to a calendar-year basis and include pro forma adjustments consisting
principally of the following: (i) the adjustments to selling, general and
administrative expenses described below; (ii) adjustments for the effects of
recording inventories on a first-in, first-out rather than on a last-in
first-out basis;(iii) adjustments for pro forma goodwill amortization using a
40-year estimated life; (iv) eliminations of historical interest expense
resulting from the application of proceeds from the IPO and the use of Common
Stock to retire outstanding indebtedness; and (v) adjustments to federal and
state income tax provisions.

        The unaudited pro forma combined statements of operations include pro
forma adjustments to selling, general and administrative expenses to reflect:
(i)the decrease in salaries and benefits associated with certain owners and
managers of the Acquired Businesses who were not employed by the Company after
the acquisition of their Acquired Business and will not be replaced or agreed
prospectively to the decrease prior to the acquisition of their Acquired
Business; (ii) the elimination of certain excess administrative support service
fees charged by the former parent company of one of the Acquired Businesses; and
(iii) the reversal of the special non-cash, non-recurring compensation expense
attributable to stock awards made by SSI and Common Stock sales and option
awards made by Invatec.

        The provision for income taxes included in the unaudited pro forma
combined statement of operations for the three months ended March 31, 1997 is an
estimate of the federal and state income taxes that would have been applicable
to the Company had it acquired all the Founding Companies on January 1, 1997.
The tax rates indicated by this provision differs from statutory federal and
state rates primarily because a portion of the amortization goodwill arising
from the acquisitions is not deductible for tax purposes.

        The computation of pro forma earnings per share for the three months
ended March 31, 1997 is based upon 7,899,554 weighted average shares
outstanding, common and common equivalent shares, which include (i)7,824,176
shares issued and outstanding for the entire three month period and (ii) 75,378
shares representing the dilution attributable to outstanding options to purchase
the Company's Common Stock, using the treasury stock method.

        The unaudited pro forma combined financial information may not be
comparable to and may not be indicative of the Company's future results of
operations because the Founding Companies were not under common control or
management throughout the period presented.

                                            4
<PAGE>
              INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

                                           DECEMBER 31,         MARCH 31,
                                               1997               1998
                                           ------------      -------------
                                                              (UNAUDITED)
                 ASSETS
CURRENT ASSETS:
Cash....................................   $  2,544,450       $    365,094
Accounts receivable, net of allowance of
  $1,079,857 and $1,423,465.............     17,680,697         27,851,234
Inventories, net........................     15,987,765         20,996,852
Prepaid expenses and other current
  assets................................      1,171,090          1,763,520
Deferred tax asset......................      3,723,448          3,944,898
                                           ------------      -------------
          Total current assets..........     41,107,450         54,921,598
PROPERTY AND EQUIPMENT, net.............     11,474,701         16,279,083
GOODWILL, net...........................     48,387,981         81,128,397
PATENT COSTS, net.......................        682,436            675,064
OTHER NONCURRENT ASSETS, net............      3,780,115          3,916,521
                                           ------------      -------------
                                           $105,432,683       $156,920,663
                                           ============      =============

  LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Short-term debt.........................   $  4,660,924       $      --
Current maturities of long-term debt....        304,310            642,113
Accounts payable and accrued expenses...     14,910,638         18,610,425
                                           ------------      -------------
          Total current liabilities.....     19,875,872         19,252,538

LONG-TERM DEBT, net.....................        318,911            321,555
CREDIT FACILITY.........................     11,750,000         50,127,800
CONVERTIBLE SUBORDINATED DEBT...........     12,493,178         12,916,928
OTHER LONG-TERM OBLIGATIONS.............      1,125,417          1,247,624
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
     Common stock, $.001 par value,
       30,000,000 shares authorized,
       7,890,198 and 8,702,338 shares
       issued and outstanding...........          7,890              8,702
     Additional paid-in capital.........     70,212,035         82,141,828
     Retained deficit...................    (10,350,620)        (9,096,312)
                                           ------------      -------------
          Total stockholders' equity....     59,869,305         73,054,218
                                           ------------      -------------

                                           $105,432,683       $156,920,663
                                           ============      =============

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

                                        5
<PAGE>
              INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

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

REVENUES................................  $  6,944,997  $  33,504,037
COST OF OPERATIONS......................     4,750,866     22,548,216
                                          ------------  -------------
     Gross profit.......................     2,194,131     10,955,821
SELLING, GENERAL AND ADMINISTRATIVE
  EXPENSES..............................     1,951,357      8,058,774
SPECIAL COMPENSATION EXPENSE ...........     2,605,005         --
                                          ------------  -------------
     Income (loss) from operations......    (2,362,231)     2,897,047
OTHER INCOME (EXPENSE):
     Interest expense, net..............      (342,699)      (709,490)
     Other..............................           (38)        12,983
                                          ------------  -------------
INCOME (LOSS) BEFORE INCOME TAXES.......    (2,704,968)     2,200,540
PROVISION (BENEFIT) FOR INCOME TAXES....      (549,416)       946,232
                                          ------------  -------------
NET INCOME (LOSS).......................  $ (2,155,552)  $  1,254,308
                                          ============  =============

NET INCOME (LOSS) BEFORE DIVIDENDS
  APPLICABLE TO PREFERRED STOCK.........  $ (2,155,552)  $  1,254,308
PREFERRED STOCK DIVIDENDS...............       (47,500)         --
                                          -------------  ------------
NET INCOME (LOSS) APPLICABLE TO COMMON
  SHARES................................  $ (2,203,052)  $  1,254,308
                                          =============  ============
EARNINGS PER SHARE - BASIC..............  $      (1.06)  $       0.16
                                          =============  ============
EARNINGS PER SHARE - DILUTED............  $      (1.06)  $       0.15
                                          =============  ============
WEIGHTED AVERAGE SHARES

  OUTSTANDING - BASIC...................     2,087,941      8,029,092
                                          =============  ============
WEIGHTED AVERAGE SHARES

  OUTSTANDING - DILUTED.................     2,087,941      8,684,764
                                          =============  ============


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

                                       6
<PAGE>
              INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                        THREE MONTHS ENDED
                                                             MARCH 31
                                                   -----------------------------
                                                          1997           1998
                                                   ------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:

     Net income (loss) .........................   $ (2,155,552)   $  1,254,308
     Adjustments to reconcile net income
      (loss) to net cash used in
        operating activities --
       Depreciation and amortization ...........        141,949         736,916
       Special compensation expense ............      2,605,005            --
       Deferred taxes ..........................           --           241,778
       (Increase) decrease in --

          Accounts receivable ..................     (1,837,333)     (3,651,014)
          Inventories ..........................        131,026      (1,732,334)
          Prepaid expenses and other
              current assets ...................       (838,886)       (653,373)
          Other noncurrent assets ..............       (629,916)        766,418
       Increase (decrease) in --
          Accounts payable and accrued
              expenses .........................      1,616,525      (1,249,657)
                                                   ------------    ------------
             Net cash used in operating
                activities .....................       (967,182)     (4,286,958)

CASH FLOWS FROM INVESTING ACTIVITIES:
    Additions to property and
        equipment ..............................        (80,881)       (746,162)
    Business acquisitions, net of cash
        acquired of $39,250 and $185,094 .......    (10,186,417)    (30,674,244)
                                                   ------------    ------------
             Net cash used in investing
                activities .....................    (10,267,298)    (31,420,406)

CASH FLOWS FROM FINANCING ACTIVITIES:

     Borrowings of long-term debt ..............     10,743,245            --
     Repayments of long-term debt ..............           --          (151,208)
     Repayments of short-term debt .............           --        (4,660,924)
     Net borrowings on credit facility .........           --        38,377,800
     Payments on noncompete
        obligations ............................           --           (65,160)
     Proceeds from exercise of stock
          options ..............................           --            27,500
     Proceeds from exercise of common
        stock warrant ..........................        596,000            --
     Preferred stock dividends .................        (47,500)           --
                                                   ------------    ------------
             Net cash provided by
                financing activities ...........     11,291,745      33,528,008

NET INCREASE (DECREASE) IN CASH ................         57,265      (2,179,356)
CASH, beginning of period ......................        396,637       2,544,450
                                                   ------------    ------------
CASH, end of period ............................   $    453,902    $    365,094
                                                   ============    ============
SUPPLEMENTAL CASH FLOW INFORMATION:

     Cash paid for interest ....................   $    342,699    $    397,244
     Cash paid for income taxes ................   $       --      $    333,111

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

                                        7
<PAGE>
              INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.      BASIS OF PRESENTATION:

        Innovative Valve Technologies, Inc. ("Invatec") was incorporated in
Delaware in March 1997 to create the leading single-source provider of
comprehensive maintenance, repair, replacement and value-added distribution
services for industrial valves and related process-system components throughout
North America. Except for its purchase of an established business in July 1997,
Invatec conducted no operations of its own prior to the closing on October 28,
1997 of (i) its initial public offering (the "IPO") of its common stock ("Common
Stock"), (ii) its purchase of two established businesses and (iii) a merger (the
"SSI Merger") in which The Safe Seal Company, Inc. ("SSI") became its
subsidiary. Earlier in 1997, SSI had purchased three established businesses. SSI
and its subsidiaries were affiliates of Invatec prior to the SSI Merger.

     For financial reporting purposes, SSI is presented as the "accounting
acquirer" of the seven businesses it and Invatec purchased through the IPO
closing date(collectively, the "Initial Acquired Businesses"), and, as used
herein, the term "Company" means (i) SSI and its consolidated subsidiaries prior
to October 31, 1997 and (ii)Invatec and its consolidated subsidiaries (including
SSI) on that date and thereafter.

        Following the IPO, the Company purchased four businesses in the fourth
quarter of 1997 and three businesses in the first quarter of 1998 (these
businesses, together with the Initial Acquired Businesses, are referred to
herein as the "Acquired Businesses"). The Company is accounting for the
acquisitions of the Aqcuired Businesses in accordance with the purchase method
of accounting. The allocation of the purchase prices paid to the assets acquired
and the liabilities assumed in the acquisitions of the Acquired Businesses has
been recorded initially on the basis of preliminary estimates of fair value and
may be revised as additional information concerning the valuation of those
assets and liabilities becomes available. The accompanying historical
consolidated statements of operations present historical information of the
Company which gives effect to the acquisitions as of their respective
acquisition dates.

        The consolidated financial statements herein have been prepared by the
Company without audit, pursuant to rules and regulations of the Securities and
Exchange Commission (the "SEC") which permit certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles to be condensed or omitted. The
Company believes the presentation and disclosures herein are adequate to make
the information not misleading, and the financial statements reflect all
elimination entries and normal adjustments that are necessary for a fair
presentation of the results for the interim periods ended March 31, 1997 and
1998.

                                        8
<PAGE>
              INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Operating results for interim periods are not necessarily indicative of the
results for full years. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Fluctuations in Operating Results" in
Item 2 of this Part I. Invatec's Annual Report on Form 10-K/A for the year ended
December 31, 1997 (the "1997 10-K Report") includes the Company's consolidated
financial statements and related notes for 1997.

2.    NEW ACCOUNTING PRONOUNCEMENT:

     Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" requires the presentation of comprehensive income in an
entity's financial statements. Comprehensive income represents all changes in
equity of an entity during the reporting period, including net income and
charges directly to equity which are excluded from net income (such as
additional minimum pension liability changes, currency translation adjustments,
unrealized gains and losses on available for sale securities). The Company
adopted this standard effective January 1, 1998. The adoption of this standard
did not have a material impact on its consolidated financial statements. For the
three month period ended March 31, 1998, there were no material items of
comprehensive income other than net income.

3.  INCOME TAXES:

     Certain of the Acquired Businesses' were subject to the provisions of
subchapter S of the Internal Revenue Code prior to their acquisition by the
Company. Under these provisions, their former stockholders paid income taxes on
their proportionate share of the earnings of these businesses. Because the
stockholders were taxed directly, their businesses paid no federal income tax
and only certain state income taxes.

     The Company files a consolidated federal income tax return that includes
the operations of the Acquired Businesses for periods subsequent to their
respective acquisition dates.

     The provision for income taxes included in the unaudited consolidated
statement of operations for the three months ended March 31, 1997 differs from
statutory federal and state rates primarily because of the partial recognition
of certain net operating loss benefits carried forward by SSI.

                                        9
<PAGE>
               INNOVATIVE VALVE TECHNOLOGIES INC. AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

4.  EARNINGS PER SHARE:

     The computation of net income per share of common stock for the interim
periods presented is presented in accordance with SFAS No. 128 "Earnings Per
Share" based on the following shares of Common Stock outstanding:

                                                           1997          1998
                                                           ----          ----

Issued and outstanding at January 1 ..............      1,481,919      7,890,198
Issued to acquire a business in the
   first quarter of 1998(weighted) ...............           --          134,638
Issued for stock options exercised
   and warrants exercised ........................        606,022          4,256
                                                        ---------      ---------
Weighted average shares outstanding
   - basic .......................................      2,087,941      8,029,092
Dilutive effect of shares issuable
 on conversion of convertible notes ..............           --          363,502
Dilutive effect of shares issuable
 on exercise of stock options ....................           --          292,170
                                                        ---------      ---------
Weighted average shares outstanding -
  diluted ........................................      2,087,941      8,684,764
                                                        =========      =========

The weighted average diluted earnings per share reflects the effect of
convertible subordinated notes which were outstanding during the periods
presented. The interest expense related to dilutive convertible subordinated
notes was approximately $46,000.

5.    ACQUISITIONS:

        During the quarter ended March 31, 1998, the Company acquired three
businesses for $30.4 million in cash and assumed debt, $0.4 million of
convertible subordinated notes and 807,828 shares of Common Stock. Of the total
purchase price paid for these acquisitions, $11 million has been allocated to
the net assets acquired and the remaining $32 million has been recorded as
goodwill. These acquisitions were accounted for as purchases and the
accompanying balance sheet as of March 31, 1998 includes preliminary allocations
of the respective purchase prices and are subject to final adjustment.

        The following table reflects, on an unaudited pro forma basis, certain
results of the combined operations of the Company as if the IPO, the SSI Merger,
the Company's acquisitions of Acquired Businesses in 1997 and the first quarter
of 1998 and certain other events and transactions discussed in Note 1 had taken
place on January 1, 1997.

        These pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of the results of operations the Company
would have obtained had the acquisitions taken effect on January 1, 1997, has
obtained since the dates of acquisition or may obtain in the future.

                                       10
<PAGE>
               INNOVATIVE VALVE TECHNOLOGIES INC. AND SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

                                                               March 31,
                                                     ---------------------------
                                                          1997            1998
                                                       ---------        -------
                                                    (Unaudited and in thousands,
                                                        except per share data)

Revenues .......................................         $39,606         $39,315
Income before income taxes .....................             669           2,034
Net income .....................................             381           1,160
                                                         =======         =======
Earnings per share - basic .....................         $  0.04         $  0.13
                                                         =======         =======
Earnings per share - diluted ...................         $  0.04         $  0.13
                                                         =======         =======



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

     The following discussion should be read in conjunction with the historical
consolidated and unaudited pro forma combined financial statements and the
notes thereto which are included in Item 1 of this Part I. This report contains
"forward-looking" statements that involve a number of risks, uncertainties and
assumptions. No assurance can be given that actual results will not differ
materially from these statements as a result of various factors. See "Factors
That May Affect Future Results" in Item 1 of the 1997 10-K Report.

OVERVIEW

     The Company derives its revenue principally from (i) sales of industrial
valves and related process-system components to its process-industry customers
and commissions paid by the manufacturers of these products in connection with
their direct sales of these products and (ii) performance of comprehensive,
maintenance, repair, replacement and value-added distribution services of
industrial valves, and related process-system components for its customers. Cost
of operations consists principally of direct costs of valves and components
sold, coupled with labor and overhead costs connected with the performance of
repair services. Selling, general and administrative expenses consist
principally of compensation and benefits payable to owners and to sales,
management and administrative personnel, insurance, depreciation and
amortization and other related expenses.

RESULTS OF OPERATIONS -- PRO FORMA COMBINED (Unaudited)

The unaudited pro forma combined results of operations for the interim periods
presented below do not purport to be comparable to and may not be indicative of
the Company's post-combination results of operations because (i) SSI and the
Acquired Businesses were not under common control or management throughout the
periods presented and (ii) the Company established a new basis of accounting to
record the purchase of the Acquired Businesses under the purchase method of
accounting. See Note 1 in Item 1 of this Part I.

                                       11
<PAGE>
                                                    THREE MONTHS ENDED
                                                         MARCH 31
                                          --------------------------------------
                                                 1997                 1998
                                          ----------------    ------------------
                                                     (IN THOUSANDS)

Revenues ...............................  $ 22,307   100.0%   $ 33,504   100.0%
Cost of operations .....................    15,981    71.6      22,548    67.3
                                          --------   -----    --------   -----
Gross profit ...........................     6,326    28.4      10,956    32.7
Selling, general and administrative
  expenses .............................     5,478    24.6       8,059    24.1
                                          --------   -----    --------   -----
Income from operations .................  $    848     3.8    $  2,897     8.6

Interest expense, net ..................       (83)   (0.3)       (709)   (2.1)
Other income ...........................         8    --            13    --
                                          --------   -----    --------   -----
Income from operations before income
   taxes ...............................  $    773     3.5%   $  2,201     6.5%
                                          ========   =====    ========   =====

THREE MONTHS ENDED MARCH 31

     REVENUES -- Revenues increased $11.2 million, or 50%, from $22.3 million
in the three months ended March 31, 1997 to $33.5 million in the corresponding
period in 1998. Approximately $9.4 million of this increase resulted from the
inclusion in the 1998 period of the results of the businesses acquired during
the fourth quarter of 1997 and the first quarter of 1998. The remaining increase
of approximately $1.8 million was attributable to overall internal growth of the
Initial Acquired Businesses, primarily related to a combined increase of $2.7
million at two repair and distribution businesses, offset by a decrease of
approximately $0.7 million at one repair business.

     GROSS PROFIT -- Gross profit increased $4.6 million, or 73%, from $6.3
million in the three months ended March 31, 1997 to $11.0 million in the
corresponding period in 1998, primarily as a result of the incremental gross
margins generated in the 1998 period by the businesses acquired during the
fourth quarter of 1997 and the first quarter of 1998. Approximately $0.7 million
of this increase resulted from internal growth at one of the Company's repair
and distribution businesses. As a percentage of revenues, gross profit increased
to 33% in the three months ended March 31, 1998 from 28% in the same period
in 1997. Approximately 1% of this increase is due to improved efficiencies among
the Initial Acquired Businesses while the remaining 4% resulted from the
inclusion of the incremental gross profit of the subsequent acquisitions.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -- Selling, general and
administrative expenses increased $2.6 million, or 47%, from $5.5 million in the
three months ended March 31, 1997 to $8.1 million in the corresponding period in
1998, primarily as a result of the incremental selling, general and
administrative expenses in the 1998 period of the businesses acquired in the
fourth quarter of 1997 and the first quarter of 1998. As a percentage of sales,
selling, general and administrative expenses decreased from 25% in the first
quarter of 1997 to 24% in the first quarter of 1998. While revenues of the
Initial Acquired Businesses increased approximately 8% in 1998, the absolute
dollars of their selling, general and administrative expenses during the first
quarter of 1998 was essentially flat as compared to those expenses in the first
quarter of 1997.

        INTEREST EXPENSE -- Interest expense increased $0.6 million, or 754%,
from $0.1 million in the first quarter of 1997 to $0.7 million in the first
quarter of 1998. This increase is primarily the result of borrowings under the
Company's Credit Facility to fund the cash portion of the purchase prices paid
for the businesses acquired during the fourth quarter of 1997 and the first
quarter of 1998.

                                       12
<PAGE>
RESULTS OF OPERATIONS - HISTORICAL (Unaudited)

     The following table sets forth for the Company certain selected
consolidated financial data and that data as a percentage of consolidated
revenues for the periods indicated:

                                                        THREE MONTHS ENDED
                                                             MARCH 31
                                            ------------------------------------
                                                  1997                1998
                                            -------------------   --------------
                                                         (IN THOUSANDS)

Revenues ...................................  $ 6,945   100.0%   $33,504  100.0%
Cost of operations .........................    4,751    68.4     22,548   67.3
                                              -------   -----    -------  -----
Gross profit ...............................    2,194    31.6     10,956   32.7
Selling, general and administrative
  expenses .................................    1,951    28.1      8,059   24.1
Special compensation expense ...............    2,605    37.5       --     --
                                              -------   -----    -------  -----
Income (loss) from operations ..............  $(2,362)  (34.0)%  $ 2,897    8.6%
                                              =======   =====    =======  =====

THREE MONTHS ENDED MARCH 31

     REVENUES -- Revenues increased $26.6 million, or 382%, from $6.9 million in
the three months ended March 31, 1997 to $33.5 million in the corresponding
period in 1998. This increase primarily resulted from the inclusion in the 1998
period of the results of the businesses acquired during the fourth quarter of
1997 and the first quarter of 1998.

     GROSS PROFIT -- Gross profit increased $8.8 million, or 399%, from $2.2
million in the three months ended March 31, 1997 to $11.0 million in the
corresponding period in 1998. This increase occurred principally as a result of
the inclusion in the 1998 period of the incremental gross profit of the
businesses acquired during the fourth quarter of 1997 and the first quarter of
1998. As a percentage of revenues, gross profit increased from 32% in the
three months ended March 31, 1997 to 33% in the same period in 1998.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -- Selling, general and
administrative expenses increased $6.1 million, or 313%, from $2.0 million in
the three months ended March 31, 1997 to $8.1 million in the corresponding
period in 1998. This increase primarily reflected the incremental selling,
general and administrative expenses in the 1998 period of the businesses
acquired during the fourth quarter of 1997 and the first quarter of 1998. As a
percentage of revenues, these expenses decreased from 28% in the three months
ended March 31, 1997 to 24% in the same period in 1998, primarily as a result
of an essentially flat spending level being spread over a larger revenue base.

YEAR 2000 ISSUE

        The Company is reviewing its computer programs and systems to ensure
that the programs and systems will function properly and be Year 2000 compliant.
In this process, the Company expects to replace some existing systems and
upgrade others. The Company presently believes that, with modifications to
existing software and converting to new software, the Year 2000 problem will not
pose significant operational problems for the Company's computer systems. The
estimated cost of these efforts are not expected to be material to the Company's
financial position or any year's results of operations.

FLUCTUATIONS IN OPERATING RESULTS

     The Company's results of operations may fluctuate significantly from
quarter to quarter or year to year because of a number of factors, including the
timing of future acquisitions, seasonal fluctuations in the demand for the
Company's services and competitive factors. Accordingly, quarterly comparisons
of the Company's revenues and operating results should not be relied on as an
indication of future performance, and the results of any quarterly period may
not be indicative of results to be expected for a full year.

                                       13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

     For the quarter ended March 31, 1998, the Company's operations used $4.3
million in cash primarily as a result of increased inventory and accounts
receivable levels required to support the Company's internal sales growth
programs. Capital expenditures during the period totaled $0.7 million. The
majority of the capital expenditures were for the purchase of operating
equipment for certain locations. Also, during the three months ended March 31,
1998, the Company had net borrowings of $38.4 million under its Credit Facility.
These borrowings were primarily used to fund the cash portion of the purchase
prices paid for the businesses acquired during the period.

    The Company's Credit Facility is a revolving credit facility of up to $60
million the Company may use for acquisitions and general corporate purposes.
Invatec's present and future subsidiaries will guarantee the repayment of all
amounts due under the facility, and the facility is secured by the capital stock
of those subsidiaries and the Company's accounts receivable and inventories. The
Credit Facility requires the consent of the lenders for acquisitions exceeding a
certain level of cash consideration, prohibits the payment of cash dividends by
Invatec, restricts the ability of the Company to incur other indebtedness and
requires the Company to comply with certain financial covenants. It is scheduled
to mature in September 2000. At March 31, 1998, $50.1 million of borrowings were
outstanding under the Credit Facility.

    At March 31, 1998, the Company's capitalization included approximately $12.9
million aggregrate prinicipal amount of convertible subordinated notes due
2002-04 that bore a weighted average interest rate of 5.3%. The Company issued
these notes as consideration in acquisitions of Acquired Businesses. These notes
are convertible into Common Stock at an initial conversion price ranging from
$16.90 to $22.52 per share.

   The Company anticipates that its cash flow from operations will provide cash
in excess of the Company's normal working capital needs, debt service
requirements and planned capital expenditures for property and equipment for at
least the next several years.

        The Company intends to pursue attractive acquisition opportunities. The
timing, size or success of any acquisition effort and the associated potential
capital commitments are unpredictable. The Company expects to fund future
acquisitions through the public or private sales of equity or debt securities as
well as through a combination of cash flow from operations, issuances of
convertible debt securities, and borrowings under the Credit Facility.
Management believes that in the event of additional cash needs required to
support the acquisition program, the Company may need to seek additional
financing through amendments to increase the borrowing capacity under the
existing Credit Facility or the public or private sale of equity or debt
securities. There can be no assurance that the Company could secure such
financing if and when it is needed or on terms the Company deems acceptable.

                                    PART II - OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

        (a)     In March 1998, Invatec issued 807,828 shares of Common Stock to
                the former owners of an Acquired Business as partial payment of
                the purchase price for that business. The sales of those shares
                of Common Stock were exempt from the registration requirements
                of the Securities Act by virtue of Section 4(2) thereof as
                transactions not involving any public offering.

        (b)     In February, 1998, Invatec issued $0.4 million aggregate
                principal amount of its convertible subordinated notes to the
                former owners of an Acquired Business as partial payment of the
                purchase price for that business. The sales of those notes (and
                the underlying rights to shares of Common Stock) were exempt
                from the registration requirements of the Securities Act by
                virtue of Section 4(2) thereof as transactions not involving any
                public offering. The issuance of shares of Common Stock on
                conversion of those notes will be exempt from those requirements
                pursuant to Section 3(a)(9) of the Securities Act.


                                       14
<PAGE>
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a) Exhibits

         EXHIBIT
         NUMBER           DESCRIPTION

         2.1*         --  Stock Purchase Agreement dated as of December 28, 1996
                          by and Among The Safe Seal Company, Inc. ("SSI"),
                          certain stockholders of Harley Industries, Inc.
                          ("Harley") and Harley (Form S-1 (Reg. No. 333-31617),
                          Ex. 2.1).

         2.2*         --  Stock Transfer Agreement dated as of January 24, 1997 
                          by and among SSI, a stockholder of Harley, Harley and
                          Harley Equipment Corporation (Form S-1 (Reg. No.
                          333-31617), Ex. 2.2).

         2.3*         --  Stock Purchase Agreement entered into on June 23, 1997
                          by and among the Company, Puget Investments, Inc.,
                          Flickinger-Benicia Inc. and the stockholders named
                          therein (Form S-1 (Reg. No. 333-31617), Ex. 2.3).

         2.4*             -- Stock Purchase Agreement dated as of July 15, 1997
                          by and among the Company, Industrial Controls &
                          Equipment, Inc., Valve Actuation & Repair Co. and the
                          other parties thereto (Form S-1 (Reg. No. 333-31617), 
                          Ex. 2.4).

         2.5*         --  Stock Purchase Agreement dated as of February 26, 1997
                          by and among SSI and the stockholders of GSV, Inc.
                          (Form S-1 (Reg. No. 333-31617), Ex. 2.5).

         2.6*         --  Stock and Real Estate Purchase Agreement dated as of 
                          May 22, 1997 by and among SSI, Plant Specialties,
                          Inc., and the stockholders named therein (Form S-1
                          (Reg. No. 333-31617), Ex. 2.6).

         2.7*         --  Agreement and Plan of Reorganization dated as of June 
                          27, 1997 by and among the Company, Southern Valve
                          Service, Inc. and the other parties thereto (Form S-1
                          (Reg. No. 333-31617), Ex. 2.7).

         2.8*         --  Stock Redemption and Purchase Agreement dated as of 
                          June 27, 1997 by and among the Company, Lee Roy
                          Jordan, Ralph Buffkin and 55 Leasing and Sales, Inc.
                          (Form S-1 (Reg. No. 333-31617), Ex. 2.8).

         2.9*         --  Agreement and Plan of Merger dated as of June 27, 1997
                          by and among the Company, IVT Acquisition, Inc. and
                          SSI, as amended as of August 15, 1997 (Form S-1 (Reg.
                          No. 333-31617), Ex. 2.9).

         2.10*        --  Uniform Provisions for Acquisitions (incorporated into
                          the agreements incorporated herein as Exhibits 2.3,
                          2.4 and 2.7) (Form S-1 (Reg. No. 333-31617), Ex.
                          2.10).

         2.11*        --  Merger Agreement dated as of December 17, 1997 by
                          and among the Company, DIVT Acquisition, LLC, Dalco,
                          Inc. and the stockholders named therein (Form 8-K
                          dated December 17, 1997 (file No. 000-23231), Ex. 2).

         2.12*        --   Stock Purchase Agreement dated as of February 27,
                          1998 by and among the Company, Cypress Industries,
                          Inc. and the Stockholders named therein (Form 8-K
                          dated February 27, 1998 (File No. 000-23231), Ex. 2).

         2.13*        --  Merger Agreement, dated as of March 16, 1998, by and 
                          among the Company, IPSCO Acquisition, Inc., IPS
                          Holding, Ltd. ("IPS") and the subsidiaries and
                          stockholders of IPS named therein (Form 8-K dated
                          March 16, 1998 (File No. 000-23231), Ex. 2). Pursuant
                          to Item 601(b)(2) of Regulation S-K, certain schedules
                          and exhibits to the agreements filed or incorporated
                          by reference as Exhibits 2.1 through 2.13 (all of
                          which are listed therein) have been omitted. Invatec
                          hereby agrees to furnish supplementally a copy of any
                          such omitted item to the SEC on request. 

                                       15
<PAGE>
         3.1*         --  Certificate of Incorporation of the Company (Form S-1 
                          (Reg. No. 333-31617), Ex. 3.1).

         3.2*         --  Bylaws of the Company (Form S-1 (Reg. No. 333-31617), 
                          Ex. 3.2).


        27.1          --  Financial Data Schedule.

*        Incorporated by reference to the filing indicated.

        (b) Reports on Form 8-K.

            --  The Company filed a Current Report on Form 8-K dated February
                27, 1998 to report the acquisition of Cypress Industries,
                Inc.("Cypress"), which incorporated by reference (A) the balance
                sheet of Cypress at December 31, 1997, (B) the statements of
                income and cash flows of Cypress for the year ended December 31,
                1997, and (C) the statement of shareholders' equity for the year
                ended December 31, 1997.

            -- The Company filed a Current Report on Form 8-K dated March 16,
               1998 to report the acquisition of IPS Holding, Ltd. ("IPSCO"),
               which incorporated by reference (A) the consolidated balance
               sheets of IPSCO at March 31, 1997 and February 28, 1998, (B) the
               consolidated statements of operations and cash flows for the year
               ended March 31, 1997 and the eleven months ended February 28,
               1998, and (C) the consolidated statements of stockholders' equity
               for the year ended March 31, 1997 and the eleven months ended
               February 28, 1998.

                                       16
<PAGE>
                                    SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Innovative Valve Technologies, Inc., has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                          INNOVATIVE VALVE TECHNOLOGIES, INC.

                                                /s/ CHARLES F. SCHUGART
                                           CHIEF FINANCIAL OFFICER, SENIOR VICE
                                                       PRESIDENT --
                                                  CORPORATE DEVELOPMENT

Dated: May 15, 1998

                                       17