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

                                   FORM 10-K/A
                                 Amendment No. 1

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

                     For the fiscal year ended June 30, 1998

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

                         Commission File Number 0-19343

                              Valley Systems, Inc.
             (Exact name of registrant as specified in its charter)

                                    Delaware
         (State or other jurisdiction of incorporation or organization)

                                   34-1493345
                      (IRS Employer Identification Number)

                  11580 Lafayette Drive, NW, Canal Fulton, Ohio
                      44614 (Address of principal executive
                               offices)(zip code)

       Registrant's telephone number, including area code: (330) 854-4526

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value
                                (Title of Class)

         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 [ ]

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [   ]

         As of August 31, 1998: (a) 7,906,617  shares of Common Stock,  $.01 par
value, of the registrant were outstanding;  (b) 2,072,872 shares of Common Stock
were held by  non-affiliates;  and (c) the aggregate  market value of the Common
Stock held by non-affiliates was $2,202,427,  based on the closing sale price of
$1.0625 per share on August 31, 1998.


<PAGE>


         The  Registrant is hereby  filing  Amendment No. 1 to Form l0-K for the
fiscal year ended June 30, 1998,  for the purpose of filing  Exhibits  10.25 and
21.1 and removing the "X" from the box on the cover page which indicates that no
Item 405 disclosure has been made.


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT
         SCHEDULES AND REPORTS ON FORM 8-K

A.       (1) Financial Statements Filed

             Valley Systems, Inc. and Subsidiaries:

               Report of Independent Accountants.
               Consolidated  Balance  Sheets  at June  30,  1998 and
               1997.
               Consolidated Statements of Income for the years ended
               June 30, 1998, 1997 and 1996. Consolidated Statements
               of Stockholders'  Equity for the years ended June 30,
               1998, 1997 and 1996.  Consolidated Statements of Cash
               Flows for the years  ended  June 30,  1998,  1997 and
               1996. Notes to Consolidated Financial Statements.

         (2)   Exhibits

No.      Description of Exhibit

2.1  Asset  Purchase  Agreement  between  Registrant  and  HydroChem  Industrial
     Services, Inc. dated September 8, 1998 (19)
3.1  Restated Certificate of Incorporation of Registrant. (1)
3.2  Certificate of Amendment of Certificate of Incorporation of Registrant.(16)
3.3  By-laws of Registrant (as amended). (16)
4.1  Form of  Designation  of Rights and  Preferences  of the Series A Preferred
     Stock. (1)
4.2  Form of  Designation  of Rights and  Preferences  of the Series B Preferred
     Stock. (1)
4.3  Certificate of Designation of Rights and  Preferences of Series C Preferred
     Stock. (15)
4.4  Specimen Certificate of Common Stock. (1)
4.5  Form of Underwriter's Warrant Agreement. (1)
4.6  1991 Stock Option Plan, and Form of Agreement. (1)(13)
4.7  Warrant  Grant  Agreement  dated June 2, 1994  between the  Registrant  and
     Rollins Investment Fund. (14)
10.1 Employment  Agreement,  dated as of March 13, 1991,  between the Registrant
     and Eugene R. Valentine. (1)
10.2 Business Development Contract between the Registrant and the Aberlyn Group,
     Inc. dated as of October 1, 1990. (1)
10.3 Agreement and Undertaking dated April 29, 1991 by and among the Registrant,
     Eugene R. Valentine,  Aberlyn Group,  Inc.,  Lawrence Hoffman and Robert M.
     Rubin. (1)
10.4 Form of Voting Trust Agreement  between Eugene R. Valentine and the Aberlyn
     Group, Inc. (1)
10.5 Letter dated March 15, 1991, to Aberlyn  Group,  Inc.,  respecting  sale of
     Common Stock to Consultant in certain events. (1)
10.6 Lease  between  the  Registrant  and  Eugene R.  Valentine  and  Cynthia J.
     Valentine dated as of November 1, 1988 as amended in March 1991. (1)
10.7 Securities  Purchase  Agreement  dated  December 16, 1991  between  Rollins
     Investment Fund ("RIF") and the Registrant. (2)
10.8 Stock Purchase  Agreement,  dated June 12, 1992, among Eugene R. Valentine,
     Nicholas J. Pace and Rollins Investment Fund. (3)
10.9 Reorganization  Agreement  dated July 31, 1992 between  Registrant  and the
     stockholders of BMW Industrial Services, Inc., and exhibits thereto. (4)

<PAGE>

10.10 Agreement dated July 31, 1992 between Registrant and Power City Industrial
      Services, Inc. (4)
10.11 Loan Agreement  from Rollins  Investment  Fund to Eugene R.  Valentine and
      Cynthia J. Valentine, dated October 14, 1992. (5)
10.12 Loan Agreement from Eugene R.  Valentine to Registrant,  dated October 16,
      1992. (5)
10.13 Standby and Subordination  Agreement  from Eugene R. Valentine and Cynthia
      J. Valentine to Fifth Third Bank. (5)
10.14 Credit and  Security  Agreement dated  December  30, 1991 by and among the
      Fifth Third  Bank,  the  Registrant,  Valley  Systems  of Ohio,  Inc.  and
      Diversified Specialty Enterprises, Inc. (6)
10.15 Lease agreements between Munco Development Company and the Registrant with
      respect to leases of office  space at Crescent  Pointe  Building,  Canton,
      Ohio. (6)
10.16 Amendment No.1,  dated as of November 16, 1992, to the Credit and Security
      Agreement, dated as of December 31, 1991, by and between   Registrant  and
      the Fifth Third Bank. (7)
10.17 Amendment No. 2, dated as of July 20,  1993,  to the  Credit and  Security
      Agreement, dated as of December  30,  1991,  by and between the Registrant
      and the Fifth Third Bank. (8)
10.18 Equipment Lease  Agreement  and  Riders No. 1 & No. 2 by and  between  the
      Registrant and Ally Capital Corporation dated December 18, 1992. (9)
10.19 Letter Agreement dated September 9, 1993 between Ally Capital  Corporation
      and the Registrant  and  Subordination  and Security  Agreement made as of
      September 9, 1993 between Ally Capital Corporation and Rollins  Investment
      Fund. (9)
10.20 Loan and Security  Agreement,  dated as of June  29,  1994 by and  between
      Registrant and Rollins Investment Fund. (15)
10.21 Term Note dated June 29, 1994 from Registrant to Rollins  Investment Fund.
      (15)
10.22 First Amendment  to Term  Note  dated  September  2,  1994 by and  between
      Registrant and Rollins Investment Fund. (15)
10.23 First Amendment to Loan and Security Agreement dated March 28, 1995 by and
      between Registrant and Rollins Investment Fund. (16)
10.24 Second Amendment to Loan and Security  Agreement dated November 5, 1996 by
      and between Registrant and Rollins Investment Fund. (18)
10.25 Purchase Order dated June 11, 1998 between Ohio  Edison/Pennsylvania Power
      Company and the Registrant (20)(21)
16.1  Letter dated July 8, 1993 from Valley  Systems,  Inc. to Feldman,  Radin &
      Co., P.C. terminating the auditor's services. (10)
21.1  Subsidiaries of the Registrant. (20)
27.1  Financial Data Schedule. (19)

__________________________________________________


(1)  Hereby  incorporated  by  reference  to  the  filing  of  the  Registrant's
     Registration  Statement on Form S-1  declared  effective by the SEC on June
     11, 1991.
(2)  Hereby  incorporated  by  reference  to the filing of the  Schedule  13D of
     Rollins Investment Fund, dated December 20, 1991.
(3)  Hereby  incorporated  by  reference  to the filing of the  Schedule  13D of
     Rollins investment Fund, dated June 18, 1992.
(4)  Hereby incorporated by reference to the filing of the Registrant's Form 8-K
     dated August 10, 1992.
(5)  Hereby incorporated by reference to the filing of the Registrant's Form 8-K
     dated October 30, 1992.
(6)  Hereby  incorporated  by reference to the filing of the  Registrant's  Form
     10-K dated November 6, 1992.
(7)  Hereby incorporated by reference to the filing of the Registrant's Form 8-K
     dated December 21, 1992.
(8)  Hereby incorporated by reference to the filing of the Registrant's Form 8-K
     dated July 30, 1993.
(9)  Hereby  incorporated  by reference to the filing of the  Registrant's  Form
     10-K dated September 24, 1993.
(10) Hereby incorporated by reference to the filing of the Registrant's Form 8-K
     dated July 9, 1993.


<PAGE>

(11) Hereby incorporated by reference to the filing of the Registrant's Form10-Q
     dated February 11, 1994.
(12) Hereby incorporated by reference to the filing of the Registrant's Form 8-K
     dated June 29, 1994.
(13) This is a compensatory plan or arrangement.
(14) Hereby incorporated by reference to the filing of the Registrant's Form 8-K
     dated September 2, 1994.
(15) Hereby  incorporated  by reference to the filing of the  Registrant's  Form
     10-K dated September 26, 1994.
(16) Hereby  incorporated  by reference to the filing of the  Registrant's  Form
     10-K dated September 25, 1995.
(17) Hereby  incorporated  by reference to the filing of the  Registrant's  Form
     10-K dated September 24, 1996.
(18) Hereby  incorporated  by reference to the filing of the  Registrant's  Form
     10-K dated September 22, 1997.
(19) Previously filed.
(20) Included as an exhibit in this Form 10-K.
(21) The  Company has applied  for  confidential  treatment  of portions of this
     Agreement.  Accordingly,  portions  thereof  have  been  omitted  and filed
     separately with the Securities and Exchange Commission.

Reports on Form 8-K filed during the three months ended June 30, 1998

         None


<PAGE>


                                   SIGNATURES


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


                                 VALLEY SYSTEMS, INC.



December 4, 1998                 By:/s/ Dennis D. Sheets
                                    __________________________________________
                                    Dennis D. Sheets    
                                    Vice President and Chief Financial Officer