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 December 31, 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 Sec tion 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 February 13, 1998,  there were  1,507,374  shares of common stock,  no par
value, outstanding.


<PAGE>



                                Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements

                                VACU-DRY COMPANY
                         CONDENSED STATEMENT OF EARNINGS
                                   (UNAUDITED)
<TABLE>
<S>                              <C>               <C>               <C>              <C>    
                                 Six Months        Six Months        Three Months     Three Months
                                    Ended             Ended             Ended            Ended
                                   12/31/97         12/31/96           12/31/97         12/31/96

REVENUES:
         Net sales               $13,689,000       $12,339,000        $7,481,000        $6,296,000

         Other                       225,000           355,000            77,000           207,000
                                 -----------       -----------        ----------        ----------
            Total revenue        $13,914,000       $12,694,000        $7,558,000        $6,503,000
                                 -----------       -----------        ----------        ----------

COST & EXPENSES:

         Cost of sales            11,457,000        10,816,000         5,870,000         5,235,000

         Selling, general &
           administrative          1,246,000         1,080,000           685,000           586,000

         Interest                    124,000            93,000            58,000            49,000
                                 -----------       -----------        ----------        ----------
           Total cost & expenses $12,827,000       $11,989,000        $6,613,000        $5,870,000
                                 -----------       -----------        ----------        ----------

EARNINGS BEFORE INCOME TAXES       1,087,000           705,000           945,000           636,000

PROVISION FOR INCOME TAXES           370,000           282,000           323,000           254,000
                                    --------          --------          --------          --------
NET EARNINGS                        $717,000          $423,000          $622,000          $382,000
                                    ========          ========          ========          ========

EARNINGS PER COMMON SHARE
         Basic                          $.44              $.26              $.38              $.23
                                        ====              ====              ====              ====
         Diluted                        $.43              $.26              $.38              $.23
                                        ====              ====              ====              ====
WEIGHTED AVERAGE COMMON SHARES
 AND EQUIVALENTS
         Basic                     1,643,668         1,655,509         1,644,559         1,635,898
                                   =========         =========         =========         =========
         Diluted                   1,648,390         1,655,509         1,652,776         1,635,898
                                   =========         =========         =========         =========
                                             See notes to interim financial statements
</TABLE>



<PAGE>




                                                          VACU-DRY COMPANY
                                                           Balance Sheets
                                                             (Unaudited)
                                                       (Dollars in thousands)
<TABLE>
<S>                    <C>         <C>         <C>         <C>                                      <C>         <C>          <C>
CURRENT ASSETS:        12/31/97    12/31/96    6/30/97     CURRENT LIABILITIES:                     12/31/97    12/31/96    6/30/97
                       --------    --------    -------                                              --------    --------    -------

Cash                       $155        $178       $283     Borrowings under line of credit              -0-         -0-      $1,354

Accounts receivable       2,722       1,670      1,567     Current maturities of long-term debt          595         576        557

Other receivable             70         124         70     Accounts payable                            2,904       2,818        490

Inventories               8,170       6,208      5,055     Accrued payroll & related liabilities         719         659        539

Prepaid expenses             56          55        131     Accrued expenses                              233         127        173

Current deferred taxes      240         225        239     Income taxes payable                          256         209        -0-
                                                                                                         ---         ---        ---
                        -------     -------     ------
Total current assets    $11,413     $ 8,460     $7,345     Total current liabilities                  $4,707      $4,389     $3,113
                                                                                                      ------      ------     ------


                                                           Borrowings  under line of credit            1,694        -0-        -0-

Net property, plant &                                      Long-term debt                              1,492       2,065      1,808
                                                                                                       -----       -----      -----
equipment                 6,867       7,554      7,231     Total long-term debt-net of current         3,186       2,065      1,808
                                                                 maturities                            -----       -----      -----

                                                           DEFERRED INCOME TAXES                         826         843        826
                                                                                                         ---         ---        ---


                                                           SHAREHOLDERS' EQUITY;

                                                           Capital stock                               3,650       3,617      3,635
                                                           Retained earnings                           5,911       5,100      5,194
                                                                                                       -----       -----      -----

                                                           Total shareholders' equity                  9,561       8,717      8,829

                      _______      _______     _______     Total liabilities and                      _______     _______   _______
Total Assets          $18,280      $16,014     $14,576       shareholders' equity                     $18,280     $16,014   $14,576
                      =======      =======     =======                                                =======     =======   =======

                                               See notes to interim financial statements

</TABLE>



<PAGE>



                                VACU-DRY COMPANY
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
               FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996


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

  Net earnings                                $717,000                $423,000
                                              --------                --------
Adjustments to reconcile net earnings to net
     cash provided by operating activities  -

       Depreciation expense                    541,000                 525,000

       Deferred income tax provision            (1,000)                 95,000

 Changes in certain assets & liabilities
     (Increase)decrease in receivables      (1,155,000)                890,000
     (Increase) in inventories              (3,115,000)             (2,778,000)
     Decrease in prepaid assets                 75,000                  61,000
     Increase in accounts payable            2,414,000               2,140,000
     Increase in accrued expenses               60,000                  21,000
     Increase in accrued payroll
          & related liabilities                180,000                 183,000
     Increase in income taxes payable          256,000                 181,000
                                            ----------              ----------
           Total adjustments                  (745,000)              1,318,000
                                           -----------              ----------
       Net cash (used for) provided
          by operating activities              (28,000)              1,741,000
                                             ----------             ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
       Capital expenditures                   (177,000)             (1,165,000)
                                            -----------               ---------
     Net cash (used for)investing activities  (177,000)             (1,165,000)

CASH FLOWS FROM FINANCING ACTIVITIES:
       Additional borrowings under the
          line of credit                     5,070,000               2,227,000
       Payments on line of credit           (4,730,000)             (3,053,000)
       Employee purchase of Company stock       15,000                  23,000
       Repurchase of common stock                  -0-                (407,000)
       Proceeds from long-term debt                -0-                 805,000
       Principal payments of long-term debt   (278,000)               (207,000)
                                             ---------               ---------
       Net cash provided by (used for)
          financing activities                  77,000                (612,000)
                                             ---------               ---------
NET (DECREASE) IN CASH                        (128,000)                (36,000)

CASH AT THE BEGINNING OF THE YEAR              283,000                 214,000
                                              --------                --------
TOTAL CASH AT THE END OF THE PERIOD           $155,000                $178,000
                                             =========                ========


                    See notes to interim financial statements




<PAGE>




                                VACU-DRY COMPANY


                      NOTES TO INTERIM FINANCIAL STATEMENTS
                       SIX MONTHS ENDED DECEMBER 31, 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 six month period ended  December 31, 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.

Inventories at December 31, 1997 and June 30, 1997, consisted of the following:

                                     12/31/97                   6/30/97

     Finished goods                $5,716,000                $4,208,000


     Work in progress                 519,000                   291,000


     Raw materials, &
          containers                1,935,000                   556,000
                                   ----------                ----------
                                   $8,170,000                $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                  $126,000                       $91,000
        Income taxes paid              $114,000                      $128,000


Note 4  -  Revolving Line of Credit -

The Company entered into a new revolving  credit  agreement with the Bank during
the second quarter ended December 31, 1997,  which calls for repayment  terms of
two years.  Accordingly  the balance owing to the Bank has been  reclassified to
long-term.







<PAGE>





                                VACU-DRY COMPANY


                      NOTES TO INTERIM FINANCIAL STATEMENTS
                       SIX MONTHS ENDED DECEMBER 31, 1997


Note 5  -  Income Taxes -

The effective  income tax rate for the six month period ending December 31, 1997
is 34%,  which is  comparable  to the effective tax rate for the year ended June
30, 1997.


Note 6 -   EPS Calculation

 The  Company  computes  earnings  per share in  accordance  with  Statement  of
 Financial  Accounting Standards Number 128 " Earnings per Share". The following
 table provides the detail of the basic and diluted earnings per computation for
 the quarter and six months ended December 31, 1997.

                                    For the Quarter Ended
                                           12/31/97
<TABLE>
<S>                             <C>                 <C>                 <C>    
                                  Income               Shares         Per Share
                                (Numerator)         (Denominator)       Amount

Net Earnings                     $ 622,000

Basic EPS
Income available to
  common stockholders              622,000              1,644,559        $.38

Effective of Dilutive Options:
Additional Shares due
  to Stock Option                                           8,217

Diluted EPS
Income available to common
  stockholders plus dilutive
  options                         $622,000              1,652,776         $.38
                                 ========               =========         ====
</TABLE>






                                      For the Six Month Ended
                                             12/31/97
<TABLE>
<S>                             <C>                 <C>                <C>   
                                  Income               Shares         Per Share
                                (Numerator)         (Denominator)       Amount

Net Earnings                    $717,000

Basic EPS
Income available to
  common stockholders           $717,000            1,643,668            $.44

Effective of Dilutive Options:
Additional Shares due
  to Stock Option                                       4,722


Diluted EPS
Income available to common stockholders
  plus dilutive options         $717,000            1,648,390            $.43
                                ========            =========            ====
</TABLE>


<PAGE>



                                VACU-DRY COMPANY


                      NOTES TO INTERIM FINANCIAL STATEMENTS
                       SIX MONTHS ENDED DECEMBER 31, 1997




Note 7 -   Subsequent Event -

   Subsequent to December 31, 1997,  the Company  repurchased  139,100 shares of
   the  Company's  common stock from two  shareholders  in privately  negotiated
   transactions  for $6.00 per share.  The repurchase price was determined based
   upon the  market  price at or about the time of the  negotiated  transaction.
   Payment  was made by delivery of the  Company's  subordinated,  interest-only
   notes.  The notes bear interest at 8-1/2% per annum  payable  monthly and are
   due in full in five years.  Payment of principal and interest is subordinated
   to  any  of  the  Company's   indebtedness   to  banks  and  other  financial
   institutions.   The  shares  were  purchased  for  use  in  possible   future
   acquisitions,  for  issuance  pursuant  to employee  stock  options and stock
   purchase plans and for other corporate  purposes.  While the Company may make
   additional  purchases of its stock from time to time, it does not contemplate
   making any purchases of such shares in the public market.




<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 December 31,
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 in nature,  the Company's  liquid
resources fluctuate during the 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. The increase in the inventory balance as of December 31, 1997 is a direct
result of the change in the normal production  period. The production period has
been reduced and consequently the current year's inventory levels have increased
on a comparative  basis with last year.  The net working  capital as of December
31, 1997  increased  by  $2,635,000,  from  $4,071,000  as December  31, 1996 to
$6,706,000 as of December 31, 1997. Of this increase, $1,694,000 was a result of
the  reclassification of the borrowings under the line of credit from current to
long-term  (See Note 4 to  Financial  Statements).  The  remaining  increase was
primarily a result of the  improved  earnings of  $717,000.  The increase in the
accounts  receivable balance as of December 31, 1997 of $1,052,000 was partially
a result of the  increased  sales for the month of December  of $529,000  and an
increase in the days  outstanding  from 32 as of  December  31, 1996 to 39 as of
December 31, 1997.

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 Company  increased  the total
limit of its revolving line of credit to $4.5 million in  anticipation of higher
short-term borrowing requirements as a direct result of the condensed production
period and the related  increase in the  inventory  levels.  As of December  31,
1997, the Company had $2,806,000 of available  borrowings on the line of credit.
This  compares to  $3,500,000  of  available  funds as of December 31, 1996 on a
total  limit  of  $3,500,000.  As of  December  31,  1997,  the  Company  was in
compliance with all of the covenants and restrictions related to its outstanding
debt.  The most  significant  source of internal  liquidity is the Company's net
working capital.  One additional possible source of long term liquidity could be
the sale of the idle production facility. Although the Company is not relying on
or pursuing the sale of this  facility as a source of  liquidity,  the Company's
short and long-term  liquidity would materially increase upon such a sale. As of
January 1998 the Company signed a long-term lease for approximately  one-half of
the previously  vacated portion of this facility.  Until this remaining space is
leased, the Company's rental income will be approximately  $5,000 per month less
than in the prior  year.  The Company is  actively  looking for a new  long-term
tenant for the balance of the available space. The Company  continues to lease a
portion of its operating facility and is in negotiations with the primary tenant
to increase its square  footage.  By  approximately  April of 1998,  the Company
should find out if this increase in lease income is probable.

The  Company  has  increased  its capital  expenditure  budget from  $532,000 to
$625,000  for the  fiscal  year ended June 30,  1998.  For the six months  ended
December 31, 1997,  the Company has spent  $177,000 of this budget.  These funds
are being primarily used to purchase new and refurbish existing  equipment.  The
Company anticipates financing these assets through internally generated funds.


Subsequent  to the end of the  quarter  ended  December  31,  1997,  the Company
repurchased 139,100 shares of common stock at a cost of $834,600.  See Note 7 to
the Financial Statements.


<PAGE>





Results of Operations

Quarter

Net sales increased $1,185,000 or 19% in the second quarter of fiscal 1997. This
increase  was  entirely  from higher unit sales volume as the average sale price
declined  slightly.  The largest  increase  was from low moisture  sales,  which
increased  $982,000.   Other  revenue  decreased  $130,000  as  a  result  of  a
non-recurring  contract cancellation charge in 1996 of $50,000 and reimbursement
by a vendor for inventory  charges of $35,000,  also in 1996. In addition rental
income  decreased  $6,000  from 1996 as a result  of the loss of a major  tenant
during the  quarter.  As  discussed  above,  the Company has secured a long-term
tenant to replace approximately one-half of this vacated space.

Cost of sales for the quarter ended  December 31, 1997 decreased 4.7% from 83.2%
to 78.5% of net  sales.  This  decrease  was  primarily  a result  of  increased
production efficiencies in addition to lower raw material costs.

Selling,  general and  administrative  expenses  increased $99,000 or 17% in the
second  quarter.  This increase is a result of higher  expenses in the following
areas: strategic planning costs, travel and additional compensation.

Interest  expense  increased  $9,000  as  a  result  of  our  increased  average
borrowings  on the line of credit.  Comparative  interest  expense for the third
quarter may increase as a result of the higher  inventory  level and the related
increase in borrowings on the line of credit.

Year-to Date

Net sales  increased  $1,350,000  or 11% for the six months  ended  December 31,
1997.  This  increase was entirely  from higher unit sales volume as the average
sale price  declined  slightly.  The largest  increase was from drum dried sales
which increased  $800,000 from last year. Last years drum dried sales were lower
partially  as a result of the  mid-year  startup  of this new  operation.  Other
revenue decreased $130,000 as a result of a non-recurring  contract cancellation
charge in 1996 of $50,000 and reimbursement by a vendor for inventory charges of
$35,000,  also in 1996.  In addition  rental  income  remained  very  comparable
between periods.

Cost of sales as a percent of net sales  decreased from 87.7% as of December 31,
1996 to 83.7% as of December 31, 1997.  Although the average sales price dropped
slightly, the production efficiencies and the lower apple costs more than offset
this decline and resulted in the reduction in cost of sales.

Selling,  general and administrative  expenses increased $166,000 or 15% through
the six months  ended  December 31,  1997.  This  increase is a result of higher
expenses in the following areas:  strategic planning and  implementation  costs,
travel and additional compensation.

Interest expense  increase $31,000 as a result of our higher average  borrowings
on the line of credit. Interest expense for the third quarter should increase as
a result of the higher inventory level and the related increase in borrowings on
the line of credit.






<PAGE>






                                     PART II
                                OTHER INFORMATION

Item 1.           Legal Proceedings

                  There are no material legal proceedings pending.


Item 2.           Changes in Securities

                  The Company's revolving line of credit agreement with its Bank
                  dated( November 1, 1997),  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. The Company received approval from
                  the Bank prior to the  repurchase of 139,100  shares of common
                  stock in January 1998.


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  -  none

                    (27) Financial Data Schedule (by electronic filing only)

                  b.       Reports on Form 8-K  -

                  Repurchase of 139,100 shares of Vacu-dry Company common stock,
                  date of report 1/9/98





<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: February 13, 1998                 /s/ Gary L. Hess
      -----------------
                                        -----------------------
                                        Gary L. Hess, President

Date: February 13, 1998                 /s/ Tom Eakin
      -----------------
                                        -----------------------
                                        Tom Eakin, VP, Finance