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, 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 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, 1998,  there were  1,513,411  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, 1998.

The financial  statements  herein presented for the quarters ended September 30,
1998 and 1997, reflect all the adjustments that in the opinion of management are
necessary  for the fair  presentation  of the  financial  position,  results  of
operations and cash flows for the periods then ended. All adjustments during the
periods  presented are of a normal recurring nature unless otherwise  stated. In
June of 1998,  Vacu-dry  Company formed a new company,  Made In Nature  Company,
Inc.(MINCO),  for the purpose of acquiring substantially all of the business and
assets of Made In Nature,  Inc., a natural  foods  marketer of organic  consumer
packaged goods. Accordingly,  the results of operations of MINCO are included in
the consolidated results below beginning June 11, 1998.

Liquidity and Capital Resources

Because the Company's operations,  except for MINCO, are seasonal, the Company's
liquid  resources  fluctuate  during the year. The Company  experiences a normal
seasonal  decrease in production in April.  Inventories  and related  short-term
borrowings  are usually at their peak at this time.  The slowdown in  production
normally  extends through July and corresponds to the  availability of raw fruit
on an affordable basis. The Company's inventory  ordinarily decreases during the
period  beginning in May and ending in September  which creates a  corresponding
increase in liquidity.  MINCO has contracts with organic growers and packers and
is normally able to schedule production as needed to meet demand.

The Company  experienced  lower cash flows during the current fiscal quarter due
to the net loss which resulted from the slower than anticipated ramp-up of sales
and certain start-up expenses of MINCO.  As a result of
the acquisition of MINCO,  the debt to equity ratio increased from .76 in fiscal
1998 to 1.15 in fiscal  1999.  The current  ratio is 2.24 for fiscal 1999 versus
1.84 for the previous fiscal year.  This increase was due to higher  inventories
as a result of the MINCO  acquisition  and the  reclassification  of  borrowings
under  the line of  credit  from  current  to  long-term  debt (as a result  the
restructuring of the loan agreement) in the later part of fiscal 1998.

The Company's  operating capital is obtained from external and internal sources.
The Company's  largest external source is a $4,500,000  revolving line of credit
provided by a bank at the Bank's  prime rate.  Under the terms of the  revolving
line of credit  agreement,  the Company can elect  shor-term  LIBOR financing or
long-term  prime rate  financing.  As of  September  30,  1998,  the Company had
$533,000 of available  funds under the line of credit.  This amount is less than
the $2,632,000 of availability under the $3,500,000  revolving line of credit at
September  30,1997.  The  decline  in  available  borrowings  resulted  from the
Company's  utilization of the revolving line to fund the MINCO acquisition.  The
Company is in the process of finalizing an agreement  with its current lender to
increase  the  existing  bank  line  of  credit  to  $5,000,000  and to  provide
longer-term  financing for the MINCO acquisition.  As of September 30, 1998, 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.


<PAGE>



Excluding computer system expenditures which are expected to be financed through
leasing arrangements, a capital expenditure budget of approximately $988,000 has
been  established  by the  Company for the 1999  fiscal  year.  These funds will
primarily be used to purchase new and recondition  existing equipment related to
the   manufacturing   operation.   The  Company   anticipates   financing  these
expenditures through internally generated funds.

As discussed in the recent Form 10-K for the year ended June 30,1998,the Company
is in the process of converting it's information technology systems and hardware
to a system that is year 2000 compliant. The new system is scheduled to be fully
implemented by April 30,1999.

Until  recently,  the  Company  has been  successful  in leasing all of its idle
production  facility other than a portion occupied by Product  Development.  The
Company signed a long-term  lease for  approximately  one-half of the previously
vacated  portion of this  facility.  The Company has secured a short-term  lease
which  expires  January  31,1999 for the  balance of the  available  space.  The
Company is working to obtain a replacement  tenant  without a loss of income but
has been  unsuccessful  to date. In addition,  the Company  continues to lease a
portion of its current operating facility and has entered into a long-term lease
with the primary tenant.

The Company  has entered  into a five-year  lease  agreement  for new  corporate
office space consisting of  approximately  9,200 square feet with a monthly base
rent of $14,600  versus  $7,800  currently  being paid.  MINCO and the Company's
corporate office will be consolidated and relocated in December,1998.

Results of Operations

Net sales  increased  $1,813,000  or 29.2% in the first  quarter of fiscal 1999.
This  increase  was  comprised  of MINCO net sales of  $693,000 or 11.2% of this
increase with the remaining balance attributed to higher unit sales.

Other revenue which is primarily comprised of rental income is comparable to the
last fiscal year.

Cost of sales (excluding  MINCO) as a percent of net sales decreased from 90% as
of September 1997 to 86% as of September 1998. The decrease is a result of lower
raw material costs, greater favorable production variances and higher absorption
of factory  overhead.  The effect of MINCO's results in the Consolidated Cost of
Sales for Fiscal 1999 was minor or approximately a 1% increase.

Selling,  general and administrative  expenses increased $878,000 or 149% in the
first  quarter.  Of this  change  approximately  $775,000  is a result  of MINCO
expenses.  The remaining balance represents  increases for employee salaries and
benefits, and temporary help.

Interest  expense  increased  $34,000  as a  result  higher  average  short-term
borrowings and increased  average  long-term debt. This increase was a result of
the additional  debt related to the MINCO  acquisition and long-term debt issued
in connection with the stock repurchase in the third quarter of fiscal 1998.

The effective  income tax rate for the first quarter ended September 30, 1998 of
35%, is comparable to the effective tax rate for the year ended June 30, 1998.


<PAGE>




                                VACU-DRY COMPANY
                  CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
                                   (UNAUDITED)


<TABLE>
<S>                               <C>                        <C>  
                                  Three Months               Three Months
                                     Ended                      Ended
                                    9/30/98                     9/30/97
REVENUES:

   Net sales                      $8,021,000                  $6,208,000

   Other                             180,000                     176,000
                                   ---------                   ---------
   Total revenue                   8,201,000                   6,384,000
                                   ---------                   ---------

COST & EXPENSES:

   Cost of sales                   6,946,000                   5,588,000
   Selling, general &
     Administrative                1,467,000                     589,000
   Interest                           99,000                      65,000
                                   ---------                   ---------
   Total cost & expenses           8,512,000                   6,242,000
                                   ---------                   ---------

EARNINGS(LOSS) BEFORE MINORITY 
  INTEREST & INCOME TAXES           (311,000)                    142,000

MINORITY INTEREST                     73,000                         -0-
                                   ---------                   ---------
EARNINGS(LOSS) BEFORE PROVISION
  INCOME TAXES                      (238,000)                    142,000

PROVISION (BENEFIT)FOR INCOME
  TAXES                             (109,000)                     47,000
                                   ---------                   ---------

NET EARNINGS (LOSS)                $(129,000)                    $95,000
                                   =========                     =======


WEIGHTED AVERAGE COMMON SHARES     1,511,104                   1,642,776
                                   =========                   =========

EARNINGS (LOSS) PER COMMON SHARE      $(.09)                        $.06
                                      ======                        ====


                    See notes to interim financial statements
</TABLE>
<PAGE>




                                VACU-DRY COMPANY
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
                             (Dollars in thousands)
<TABLE>
<S>                     <C>        <C>       <C>                                                    <C>          <C>        <C>
                        09/30/98   09/30/97  6/30/98                                                09/30/98     09/30/97   6/30/98
ASSETS                                                          LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT ASSETS:                                                 CURRENT LIABILITIES:

Cash                       $166     $232      $385              Borrowings under line of credit          $500       $868   $   -0-

Accounts receivable       2,669    2,567     2,298              Current maturities of long-term debt      438        595       438

Income tax  receivable      272       70       163              Accounts payable                        3,300      2,886     3,789

Inventories               7,932    6,284     7,926              Accrued payroll & related liabilities     742        581       936

Prepaid expenses            203       92       298              Accrued expenses                          197        175       353

Current deferred taxes      360      239       360              Income taxes payable                      -0-         47       -0-
                                                                                                       ------         --       ---
                         ------   ------    ------
Total current assets     11,602    9,484    11,430              Total current liabilities               5,177      5,152     5,516
                                                                                                        -----      -----     -----

                                                                BORROWING UNDER LINE OF CREDIT          3,467        -0-     2,297
                                                                                                        -----        ---     -----
                                                                LONG TERM DEBT-net of
                                                                   current maturities                   2,011      1,631     2,203
PROPERTY, PLANT &                                                                                       -----      -----     -----
EQUIPMENT - net           7,012    7,055     6,784
                                                                DEFERRED INCOME TAXES                     865        826       865
                                                                                                          ---        ---       ---

                                                                MINORITY INTEREST                         436        -0-       509
                                                                                                          ---        ---       ---

GOODWILL, net of                                                SHAREHOLDERS' EQUITY:
  of amortization         2,612      -0-     2,562
                                                                Capital stock                           2,850      3,641     2,837
                                                                Warrants for common stock                 456       -0-        456
                                                                Retained earnings                       5,964      5,289     6,093
                                                                                                        -----      -----     -----

                                                                Total shareholders' equity              9,270      8,930     9,386

                        _______  _______   _______              Total liabilities and                 _______    _______   _______
Total Assets            $21,226  $16,539   $20,776                shareholders' equity                $21,226    $16,539   $20,776
                        =======  =======   =======                                                    =======    =======   =======

                    See notes to interim financial statements

</TABLE>
<PAGE>




                                VACU-DRY COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997



CASH FLOWS FROM OPERATING ACTIVITIES:                1998                1997
                                                     ----                ----

Net earnings (loss)                               $(129,000)            $95,000
                                                   ---------             ------

Adjustments to reconcile net earnings (loss) to net
cash provided by (used for) operating activities -

  Depreciation and amortization expense            313,000              269,000
  Minority interest                                (73,000)              -0-

Changes in assets & liabilities -
  Accounts receivable, net                        (415,000)          (1,000,000)
  Income tax receivable                           (109,000)              -0-
  Inventories, net                                 (43,000)          (1,229,000)
  Prepaid expenses                                  95,000               39,000
  Accounts payable                                (489,000)           2,396,000
  Accrued expenses                                (156,000)               2,000
  Accrued payroll & related liabilities           (194,000)              42,000
  Income taxes payable                               -0-                 47,000
                                                -----------            ---------
     Total adjustments                          (1,071,000)             566,000
                                                -----------            ---------
  Net cash provided by (used for)
     operating activities                       (1,200,000)             661,000
                                                -----------            ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                            (510,000)             (93,000)
                                                 ----------             --------
  Net cash used for investing activities          (510,000)             (93,000)
                                                 ----------             --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings under the line of credit            4,945,000            2,221,000
  Payments on line of credit                    (3,275,000)          (2,707,000)
  Principal payments of long-term debt            (192,000)            (139,000)
  Issuance of common stock                          13,000                6,000
                                                ----------             --------

  Net cash provided by (used for)
    Financing activities                         1,491,000             (619,000)
                                                ----------              --------

NET DECREASE IN CASH                              (219,000)             (51,000)

CASH AT THE BEGINNING OF THE YEAR                  385,000              283,000

                                                  --------             --------
TOTAL CASH AT THE END OF THE PERIOD               $166,000             $232,000
                                                  ========             ========



                    See notes to interim financial statements



<PAGE>



                                VACU-DRY COMPANY
                      NOTES TO INTERIM FINANCIAL STATEMENTS
                      THREE MONTHS ENDED SEPTEMBER 30, 1998


Note 1 -

The  accompany  fiscal  1999 and 1998  unaudited  interim  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  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, 1998.  The results of operations
for the three month period ended  September  30, 1998 are not  indicative of the
results that may be achieved for the entire year ending June 30,1999.

Due to the seasonal  nature of the  company's  business,  the prior year interim
balance sheet is presented in the accompanying unaudited financial statement.
                                           
Reclassifications  - Certain prior year amounts were  reclassified to conform to
the current year presentation.

Note 2 -  Inventories -

Inventories are stated at LIFO cost for Vacu-dry;  FIFO cost for Made In Nature.
The excess of current cost of the  inventory  over LIFO cost was  $1,115,000  at
September 30, 1998 and June 30, 1998. Inventories at September 30, 1998 and June
30, 1998, consisted of the following:

      Vacu-dry  -  LIFO
                                             9/30/98                   6/30/98
Finished goods                             $3,973,000                $4,695,000

Work in progress                              452,000                   470,000

Raw materials & containers                  1,187,000                   442,000
                                           ----------                ----------
                                            5,612,000                 5,607,000
       MINCO - FIFO

Finished goods                              2,320,000                 2,319,000
                                            ---------                 ---------

       Total inventories                   $7,932,000                $7,926,000
                                           ==========                ==========


Note 3 -          Statement of Cash Flows -

Interest and income tax payments reflected in the Consolidated Statement of Cash
Flows were as follows:
                                                   1998             1997
                                                   ----             ----

   Interest paid                               $   90,000       $   71,000
   Income taxes paid                           $    -0-         $    -0-


<PAGE>

                                     PART II
                                OTHER INFORMATION


Item 1  -    Legal proceedings

             There are no material legal proceedings pending.


Item 2  -    Changes in Securities

             There are no material 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 declaring or paying of any
             dividend or distribution in either shares of any
             class of the Company's stock now or hereafter
             outstanding, without the prior approval by the Bank.


Item 3 -     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 4 -     Exhibits & Reports on Form 8-K

               a.     Exhibits  -  none

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

               b.  Reports on Form 8-K  -  none


<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.


Date:    November 13, 1998         /s/ Gary L. Hess
                                   -----------------------
                                   Gary L. Hess, President


Date:    November 13, 1998         /s/ Tom R. Eakin
                                   -----------------------
                                   Tom R. Eakin, VP Finance



<PAGE>