SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                      FORM 10-Q


         Quarterly  Report  Pursuant  to  Section  13 or 15(d) X of the
         Securities Exchange Act of 1934.
       
           For the quarterly period ended September 30, 1997 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 01912

                                VACU-DRY COMPANY

                  (Exact name of registrant as specified in its charter)




         California                                 94-1069729
(State of incorporation)                         (IRS Employer
                                                  Identification #)

7765 Healdsburg Ave., Sebastopol, California           95472
(Address of principal executive offices)             (Zip Code)


Registrant's telephone number, including area code:  707/829-4600


                             Not-Applicable
-----------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)

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:____


As of November 12, 1997,  there were  1,644,538  shares of common stock,  no par
value, outstanding.




<PAGE>





Item 2.           Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

THIS  FORM 10-Q  CONTAINS  FORWARD-LOOKING  STATEMENTS  WHICH  INVOLVE  RISK AND
UNCERTAINTIES.  THE COMPANY'S ACTUAL RESULTS MAY DIFFER  SIGNIFICANTLY  FROM THE
RESULTS  DISCUSSED IN THE  FORWARD-LOOKING  STATEMENTS AS A RESULT OF CERTAIN OF
THE FACTORS SET FORTH IN THE  COMPANY'S  ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED JUNE 30, 1997.

The financial  statements  herein presented for the quarters ended September 30,
1997 and 1996, reflect all the adjustments that in the opinion of management are
necessary for the fair  presentation  of the  financial  position and results of
operations  for the period  then  ended.  All  adjustments  during  the  periods
presented, are of a normal recurring nature.

Liquidity and Capital Resources

Because the Company's  operations are seasonal,  the Company's  liquid resources
normally  fluctuate  during the year in a way that changes very little from year
to year.  The  inventory  and  accounts  payable  balances are normally at their
lowest level as of the end of the fiscal year and their  highest level as of the
end of the second  quarter.  This  seasonal  increase  in the  accounts  payable
balance  results in a temporary  increase in the Debt to Equity ratio.  Normally
during the first quarter of the fiscal year the inventory  levels  increase as a
result of the  beginning of the  production  season.  During the current  fiscal
year,  the  Company  is  changing  its normal  production  period.  The  Company
anticipates  this will  increase  comparative  inventories  during the first six
months of fiscal 1998.  The Company has  arranged  with its Bank to finance this
increase if needed with an increase in the revolving line of credit. As a result
of this increase in production  volume in the first  quarter,  inventories  were
significantly  higher than a year ago. This  difference was partially due to the
fact the inventory  level at September 30, 1996, was one of the lowest levels in
years.  Net  working  capital  remained  relatively  constant at  $4,332,000  as
compared to the June 30, 1997 level of $4,232,000.  The increase in the accounts
receivable  and  inventory  balances  were  funded by the  increase  in accounts
payable.  With the  increased  profits and  reduced  capital  expenditures,  the
Company's excess cash was used to paydown $486,000 on the line of credit.

The  Company's  liquidity  resources  are  obtained  from  external and internal
sources.  The Company's  largest  external  source is a revolving line of credit
provided by a bank at the Bank's  prime  rate.  The most  significant  source of
internal  liquidity  is the  Company's  net working  capital.  The Company has a
revolving  line of credit limit of $3,500,000  secured by inventory and accounts
receivable.  As of September 30, 1997,  the Company had  $2,632,000 of available
funds  under the line of credit.  As of  September  30, 1996 the Company did not
have any borrowings outstanding on the line of credit. As of September 30, 1997,
the Company was in compliance with all of the covenants and restrictions related
to its  outstanding  debt. The Company's loan agreement with its bank includes a
negative covenant regarding the declaring or paying of a dividend in cash, stock
or any other property without the prior approval by the bank.


The  Company  has  established  a capital  expenditure  budget of  approximately
$532,000 for the 1997-1998  fiscal year.  These funds will  primarily be used to
purchase new and refurbish existing equipment. The Company anticipates financing
these  assets  through  internally  generated  funds and through the use of debt
financing.

Until  recently,  the  Company  has been  successful  in leasing all of its idle
production  facility  other than a portion  occupied by Product  Development.  A
major tenant, that accounted for 38 percent of rental income in fiscal 1997,


<PAGE>



has  informed  the  Company,  they will not renew their  lease which  expires in
November of 1997. The Company is actively pursuing a replacement  tenant without
the loss of income.  The Company will lose  $17,000 per month in lease  revenue,
until a replacement tenant is found. The Company continues to lease a portion of
its  operating  facility  and is in  negotiations  with the  primary  tenant  to
increase their square footage.

The Company  anticipates  that  profitable  operations  and debt  financing will
satisfy the Company's future liquidity and capital needs.  However,  the Company
will utilize future private or public financing if interest rates rise or if the
Company's growth prospects require additional funds for operations.


Results of Operations

Net sales  increased  $165,000 or 2.7% in the first quarter of fiscal 1998. This
increase  was all a result of higher unit  sales.  Average  unit prices  dropped
slightly.

Other  revenue  increased  slightly  from last year.  Other revenue is comprised
primarily of net rental  income.  If a  replacement  tenant is not found for the
lease expiration  described above,  other revenue will be reduced by $17,000 per
month beginning in November 1997.

Cost of sales as a percent of net sales  decreased from 92% as of September 1996
to 90% as of  September  1997.  The  decrease is a result of lower raw  material
costs. In addition the comparative net overhead  expenses  between  quarters was
lower in the current year.

Selling,  general and administrative  expenses increased $72,000 or 14.6% in the
first  quarter.  This  change is a result of  increased  travel,  brokerage  and
professional fees.

Interest  expense  increased  $21,000  as a result  higher  average  short  term
borrowings and increased average long-term debt.

The effective  income tax rate for the first quarter ended September 30, 1997 of
33%, is  comparable  to the effective tax rate for the year ended June 30, 1997.
As of June 30, 1997, the Company has state tax credit  carryforwards  of $99,000
to offset future taxable income.



<PAGE>





                                       -3-


                                     PART II
                                OTHER INFORMATION

Item 1.           Legal Proceedings

                           There are no legal proceedings pending.

Item 2.           Changes in Securities

                  The Company's revolving line of credit agreement with its Bank
                  dated( November 1, 1996),  includes a covenant which prohibits
                  the  declaring  or paying of any dividend or  distribution  in
                  either  cash,  stock or any other  property  on the  Company's
                  stock  now  or  hereafter  outstanding,  nor  redeem,  retire,
                  repurchase  or  otherwise  acquire  shares of any class of the
                  Company's  stock now or  hereafter  outstanding,  without  the
                  prior approval by the Bank.

Item 4.           Submission of Matters to a Vote of Security Holders.

                           No  matters  were  submitted  to a vote  of  security
                           holders during the period covered by this report.



Item 6.           Exhibits & Reports on Form 8-K

                  a.       Exhibits
                             (27) Financial Data Schedule (by electronic
                                  filing only)

                  b.       Reports on Form 8-K  -  none


<PAGE>




                                VACU-DRY COMPANY
                             STATEMENTS OF EARNINGS
                                   (UNAUDITED)


                                             Three Months        Three Months
                                                 Ended              Ended

                                                9/30/97             9/30/96
REVENUES:

         Net sales                           $6,208,000           $6,043,000

         Other                                  153,000              148,000
                                             ----------           ----------
         Total revenue                       $6,361,000           $6,191,000
                                             ----------            ---------

COST & EXPENSES

         Cost of sales                        5,588,000           5,584,000

         Selling, general &
           administration                       566,000             494,000

         Interest                                65,000              44,000
                                              ---------           ---------
                                             $6,219,000          $6,122,000
                                              ---------           ---------


EARNINGS BEFORE INCOME TAXES                    142,000              69,000

PROVISION FOR INCOME TAXES                       47,000              27,000
                                                -------              ------

NET EARNINGS                                    $95,000             $42,000
                                                =======             =======


EARNINGS PER COMMON SHARE                          $.06                $.03
                                                   ====                ====


WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING                                 1,642,776           1,675,120
                                              =========           =========



                            See notes to interim financial statements







<PAGE>

<TABLE>
<CAPTION>


                                VACU-DRY COMPANY
                                                                        Balance Sheets
                                                                         (Unaudited)
                                                                     (Dollars in thousands)
<S>                        <C>         <C>         <C>         <S>                                   <C>       <C>        <C>
CURRENT ASSETS:            9/30/97    9/30/96     6/30/97     CURRENT LIABILITIES:                   9/30/97   9/30/96     6/30/97
                           -------    -------     -------                                            -------   -------     -------
Cash                          $232       $515        $283     Borrowings under line of credit           $868     $ -0-      $1,354

Accounts receivable          2,567      1,964       1,567     Current maturities of long-term debt       595      415          557

Other receivable                70         16          70     Accounts payable                         2,886    2,071          490

Inventories                  6,284      3,652       5,055     Accrued payroll & related liabilities      581      640          539

Prepaid expenses                92         96         131     Accrued expenses                           175       72          173

Current deferred taxes         239        225         239     Income taxes payable                        47        8          -0-
                           -------     ------      ------                                              -----   ------       ------
Total current assets        $9,484     $6,468      $7,345
                                                                     Total current liabilities        $5,152   $3,206       $3,113
                                                                                                      ------   ------       ------


Net property, plant &                                          LONG-TERM DEBT - Net of
equipment                    7,055      7,335       7,231           current maturities                 1,631    1,525        1,808
                                                                                                      -----     -----        -----

                                                               DEFERRED INCOME TAXES                     826      748          826
                                                                                                         ---      ---          ---



                                                               SHAREHOLDERS' EQUITY:

                                                                      Capital stock                    3,641    3,605        3,635
                                                                      Retained earnings                5,289    4,719        5,194
                                                                                                       -----    -----       -----

                                                                      Total shareholders' equity       8,930    8,324        8,829

                          _______     _______     _______      Total liabilities and                  ______   _______     _______
Total Assets              $16,539     $13,803     $14,576        shareholders' equity                $16,539  $13,803      $14,576
                          =======     =======     =======                                            =======  =======      =======


                                                See notes to interim financial statements


</TABLE>

<PAGE>



                                VACU-DRY COMPANY
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996





CASH FLOWS FROM OPERATING ACTIVITIES:
                                                          1997           1996
                                                          ----           ----

Net earnings                                             $95,000        $42,000
                                                         -------        -------
Adjustments to reconcile net earnings to net
     cash provided by operating activities  -

     Depreciation expense                                269,000        262,000

  Changes in certain assets & liabilities
     Receivables                                      (1,000,000)       704,000
     Inventories                                      (1,229,000)      (222,000)
     Prepaid expenses                                     39,000         20,000
     Accounts payable                                  2,396,000      1,393,000
     Accrued expenses                                      2,000        (34,000)
     Accrued payroll & related liabilities                42,000        164,000
     Income taxes payable                                 47,000        (24,000)
                                                        ---------      ---------
           Total adjustments                             566,000      2,263,000
                                                        ---------      ---------
       Net cash provided by operating activities         661,000      2,305,000
                                                        ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
       Capital expenditures                              (93,000)      (679,000)
                                                        ---------      ---------
       Net cash (used for) investing activities          (93,000)      (679,000)
                                                        ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Additional borrowings under the line of credit  2,221,000        253,000
       Payments on line of credit                     (2,707,000)    (1,079,000)
       Issuance of common stock                            6,000         11,000
       Repurchase of common stock                         -0-          (407,000)
       Principal payments of long-term debt             (139,000)      (103,000)
                                                       ---------     ----------
       Net cash (used for)financing activities          (619,000)    (1,325,000)
                                                        --------     ----------
NET INCREASE (DECREASE)IN CASH                           (51,000)       301,000

CASH AT THE BEGINNING OF THE YEAR                        283,000        214,000
                                                        --------      ---------
TOTAL CASH AT THE END OF THE PERIOD                     $232,000       $515,000
                                                        ========       ========



                    See notes to interim financial statements


<PAGE>






                                VACU-DRY COMPANY
                      NOTES TO INTERIM FINANCIAL STATEMENTS
                      THREE MONTHS ENDED SEPTEMBER 30, 1997


Note 1  -        
              The accompanying 1997 and 1996 unaudited interim financial
              statements have been prepared pursuant to the rules of the
              Securities and Exchange Commission.  Certain information
              and disclosures normally included in annual financial
              statements prepared in accordance with generally accepted
              accounting principles have been condensed or omitted
              pursuant to such rules and regulations although the Company
              believes these disclosures are adequate to make the
              information not misleading.  In the opinion of management,
              all adjustments necessary for a fair presentation for the
              period presented have been reflected and are of a normal
              recurring nature.  These interim financial statements
              should be read in conjunction with the financial statements
              and notes thereto for each of the three years in the period
              ended June 30, 1997.  The results of operations for the
              three month period ended September 30, 1997 are not
              indicative of the results that may be achieved for the
              entire year ending June 30, 1998.

              Reclassification   -  Certain   1996   amounts   were
              reclassified to conform to the 1997 presentation.

Note 2  -     Inventories  -

              Inventories  are  stated at the lower of cost,  using
              the last-in, first-out (LIFO) method or market.

              The excess of current cost of the inventory over LIFO
              cost  was   $2,180,000  at  September  30,  1997  and
              $2,180,000 at June 30, 1997.

              Inventories  at September 30, 1997 and June 30, 1997,
              consisted of the following:

                                       9/30/97                  6/30/97

              Finished goods         $4,429,000                $4,208,000

              Work in progress          404,000                   291,000

              Raw materials &
                  containers          1,451,000                   556,000
                                     ----------                ----------
                                     $6,284,000                $5,055,000
                                     ==========                ==========


Note 3  -     Statement of Cash Flows  -

              Interest  and income tax  payments  reflected  in the
              Consolidated Statement of Cash Flows were as follows:

                                           1997                     1996
                                           ----                     ----

              Interest paid               $71,000                  $45,000
              Income taxes paid           $83,000                  $53,000



<PAGE>



                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.









                                                 VACU-DRY COMPANY


Date: November 14, 1997                          /s/ Gary L. Hess
      -----------------
                                                 -----------------------
                                                 Gary L. Hess, President

Date: November 14, 1997                          /s/ Tom Eakin
      -----------------
                                                 -----------------------
                                                  Tom Eakin, VP, Finance