SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


[X]  Quarterly  Report  Pursuant  to  Section  13 or 15 (d) X of the  Securities
     Exchange Act of 1934.

     For the quarterly period ended December 31, 1999 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

                            SONOMAWEST HOLDINGS, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
             ------------------------------------------------------


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


100 STONY POINT ROAD, SUITE 200, SANTA ROSA, CALIFORNIA                95401
-------------------------------------------------------                -----
(Address of principal executive offices)                             (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  707/535-4000
--------------------------------------------------


                                VACU-DRY COMPANY
           ----------------------------------------------------------
              (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 February 22, 2000,  there were  1,520,734  shares of common stock,  no par
value, outstanding.

<PAGE>

                            SONOMAWEST HOLDINGS, INC.

                                TABLE OF CONTENTS


                                                                           Page
                                                                           ----
PART  I.  FINANCIAL INFORMATION

  Item 1. Condensed Consolidated Financial Statements

          Condensed Consolidated Balance Sheets at December 31, 1999
            and June 30, 1999................................................3
          Condensed Consolidated Statements of Earnings -
            Three and Six Months Ended December 31, 1999 and 1998............5
          Condensed Consolidated Statements of Cash Flows -
            Six Months Ended December 31, 1999 and 1998......................6
          Notes to Condensed Consolidated Financial Statements...............7

  Item 2. Management's Discussion and Analysis of Financial Condition
            and Results of Operations........................................9



PART II.  OTHER INFORMATION

  Item 1. Legal Proceedings.................................................12

  Item 2. Changes in Securities.............................................12

  Item 4. Submission of Matters to a Vote of Security Holders...............12

  Item 6. Exhibits and Reports on Form 8-K..................................12


  Signature.................................................................13

<PAGE>
<TABLE>
<CAPTION>

PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                            SONOMAWEST HOLDINGS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
                              AMOUNTS IN THOUSANDS

                                                             12/31/99           6/30/99
                                                           ------------       ------------
<S>                                                        <C>                <C>
CURRENT ASSETS:
Cash                                                       $      8,643       $        548

Accounts receivable, net                                            629                327

Prepaid income taxes                                                 --                566


Inventories, net                                                  1,122              1,513

Prepaid expenses                                                     91                165

Current deferred taxes, net                                       1,439              2,032

Net current assets of
 discontinued operations                                             --              5,222
                                                           ------------       ------------

Total current assets                                             11,924             10,373
                                                           ------------       ------------

Property, plant, equipment, net                                   2,892              3,135

Net assets of discontinued operations                                --              3,859

Deferred income taxes, net                                          171                326

Other assets                                                         75                 --
                                                           ------------       ------------
Total assets                                               $     15,062       $     17,693
                                                           ============       ============

</TABLE>


            See Notes to Condensed Consolidated Financial Statements

                                       3
<PAGE>

                            SONOMAWEST HOLDINGS, INC.
                CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
                                   (UNAUDITED)
                              AMOUNTS IN THOUSANDS

<TABLE>
<CAPTION>

                                                             12/31/99           6/30/99
                                                           ------------       ------------
<S>                                                        <C>                <C>
CURRENT LIABILITIES:

Borrowings under line of credit                            $         --       $      5,745

Current maturities of long term debt                                344              1,416


Accounts payable                                                    254                542

Income taxes payable                                                712                 --

Accrued payroll and related liabilities                             153                437

Other accrued expenses                                               99                183

Net current liabilities of
   discontinued operations                                          974                 --
                                                           ------------       ------------

Total current liabilities                                         2,536              8,323
                                                           ------------       ------------

Net liabilities of discontinued operations                          446                 --

Long term debt-net of
    current maturities                                            2,565              2,860
                                                           ------------       ------------

Total liabilities                                                 5,547             11,183
                                                           ------------       ------------

SHAREHOLDERS' EQUITY:
Capital stock                                                     2,897              2,890
Warrants for common stock                                           456                456
Retained earnings                                                 6,162              3,164
                                                           ------------       ------------
Total shareholders' equity                                        9,515              6,510
                                                           ------------       ------------

Total liabilities and shareholders' equity                 $     15,062       $     17,693
                                                           ============       ============
</TABLE>

            See Notes to Condensed Consolidated Financial Statements

                                       4
<PAGE>
<TABLE>
<CAPTION>

                            SONOMAWEST HOLDINGS, INC.
                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                                   (UNAUDITED)
                 AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

                                                                          Six Months            Three Months
                                                                       Ended December 31      Ended December 31
                                                                       ------------------    ------------------
                                                                         1999      1998       1999        1998
                                                                       -------    -------    -------    -------
<S>                                                                    <C>        <C>        <C>        <C>
REVENUES:
   Net Sales                                                           $ 1,151    $ 1,258    $   535    $   565
   Rental                                                                  666        279        462        165
                                                                       -------    -------    -------    -------
  Total revenue                                                        $ 1,817    $ 1,537    $   997    $   730
                                                                       -------    -------    -------    -------

Costs & Expenses
   Cost of sales                                                         1,095      1,138        652        496
   Selling, general & administrative                                     1,273      1,472        571        696
                                                                       -------    -------    -------    -------
   Total costs and expenses                                              2,368      2,610      1,223      1,192
                                                                       -------    -------    -------    -------

Other income (expense), net                                                 (3)       (70)        47        (49)
                                                                       -------    -------    -------    -------

Loss from continuing operations before minority
         interest and benefit for income taxes                            (554)    (1,143)      (179)      (511)

MINORITY INTEREST                                                           --        132         --         59
                                                                       -------    -------    -------    -------
Loss from continuing operations before benefit for income taxes           (554)    (1,011)      (179)      (452)

BENEFIT FOR INCOME TAXES                                                  (221)      (401)       (72)      (180)
                                                                       -------    -------    -------    -------
Net loss from continuing operations                                       (333)      (610)      (107)      (272)
                                                                       -------    -------    -------    -------

DISCONTINUED OPERATIONS:
   Earnings from discontinued operations, net of income taxes              431        801         --        592
   Gain (loss) on sale of discontinued business, net of income taxes     2,899         --       (421)        --
                                                                       -------    -------    -------    -------
NET EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS                         3,330        801       (421)       592
                                                                       -------    -------    -------    -------

NET EARNINGS (LOSS)                                                    $ 2,997    $   191    $  (528)   $   320
                                                                       =======    =======    =======    =======

WEIGHTED AVERAGE COMMON SHARES AND EQUIVALENTS:
  Basic                                                                  1,520      1,512      1,520      1,516
                                                                       =======    =======    =======    =======
  Diluted                                                                1,551      1,540      1,542      1,540
                                                                       =======    =======    =======    =======

EARNINGS (LOSS) PER COMMON SHARE
Continuing operations
 Basic                                                                 $ (0.22)   $ (0.40)   $ (0.07)   $ (0.18)
                                                                       =======    =======    =======    =======
 Diluted                                                               $ (0.22)   $ (0.40)   $ (0.07)   $ (0.18)
                                                                       =======    =======    =======    =======

Discontinued operations:
Basic                                                                  $  2.19    $  0.53    $ (0.28)   $  0.39
                                                                       =======    =======    =======    =======
Diluted                                                                $  2.15    $  0.52    $ (0.28)   $  0.38
                                                                       =======    =======    =======    =======

Net earnings (loss):
Basic                                                                  $  1.97    $  0.13    $ (0.35)   $  0.21
                                                                       =======    =======    =======    =======
Diluted                                                                $  1.93    $  0.12    $ (0.35)   $  0.21
                                                                       =======    =======    =======    =======
</TABLE>

            See Notes to Condensed Consolidated Financial Statements

                                       5
<PAGE>
<TABLE>
<CAPTION>
                            SONOMAWEST HOLDINGS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                              AMOUNTS IN THOUSANDS
               FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998


                                                              1999          1998
                                                            --------      --------
<S>                                                         <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings                                                $  2,998      $    191
Adjustments to  reconcile net earnings (loss)
     to net cash used for  operating activities:
     Earnings from discontinued operations, net                 (431)         (801)
     Gain on sale of discontinued business, net               (2,899)           --
     Depreciation and amortization expense                       124            83
       Minority interest                                          --          (132)
     Changes in assets & liabilities:
     Accounts receivable, net                                   (302)         (104)
     Income tax receivable                                       250           (71)
     Inventories, net                                            391        (4,450)
     Prepaid and other assets                                     (1)          179
     Accounts payable                                           (288)        1,585
     Accrued payroll & related liabilities                      (284)            3
     Other accrued expenses                                      (84)           (3)
                                                            --------      --------
Net cash provided by (used for) operating activities            (526)       (3,520)
                                                            --------      --------
     Net cash provided by discontinued operations             15,764         1,132
                                                            --------      --------
     Net cash provided by (used) in operating activities      15,238        (2,388)
                                                            --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES
     Capital expenditures                                        (38)         (891)
                                                            --------      --------
     Net cash provided by (used for) investing activities        (38)         (891)
                                                            --------      --------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Borrowings under the line of credit                       3,727        12,812
     Payments on the line of credit                           (9,472)      (11,617)
     Principal payments of current debt                       (1,367)         (283)
     MINCO financing proceeds                                     --         2,100
     Issuance of common stock                                      7            14
                                                            --------      --------
     Net cash provided by (used for) financing activities     (7,105)        3,026
                                                            --------      --------

NET INCREASE (DECREASE) IN CASH                                8,095          (253)

CASH AT THE BEGINNING OF THE YEAR                                548           385
                                                            --------      --------

TOTAL CASH AT THE END OF THE PERIOD                         $  8,643      $    132
                                                            ========      ========

            See notes to Condensed Consolidated Financial Statements
</TABLE>
                                       6
<PAGE>


                            SONOMAWEST HOLDINGS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                       SIX MONTHS ENDED DECEMBER 31, 1999

Note 1-

The  accompanying  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 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 periods  presented have been reflected and are of a normal
recurring nature except as discussed below.  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,  1999.  The results of
operations for the three- and six-month  periods ended December 31, 1999 are not
indicative  of the results that will be achieved for the entire year ending June
30, 2000.

Reclassification  - Certain  previously-reported  amounts were  reclassified  to
conform to the current presentation with respect to discontinued operations.

Note 2-

In July 1999, the Company  consummated an asset purchase agreement (the Purchase
Agreement)  with Tree Top, Inc. The Purchase  Agreement  governs the sale of all
intangible  assets  (primarily  trademarks,  know how and  customer  lists)  and
certain of the equipment  relating to the  Company's  processed  apple  products
line.  Although the Purchase  Agreement  excludes other product lines within the
Company's  ingredient  segment,  the Company is actively  seeking buyers for the
remaining  product  lines of the  ingredients  segment and plans to  discontinue
production of all ingredients  segment products by June 30, 2000.  Consequently,
the  ingredients  segment has been presented as a discontinued  operation in the
accompanying consolidated financial statements.  The purchase price for the sale
of the  processed  apple  product  line of  $12,000,000  was paid in cash at the
closing  date  of the  sale  on July  30,  1999.  In  addition,  apple  products
inventories with a net book of $ 1.7 million were purchased by Tree Top, Inc. at
a price of $1.9  million.  Tree Top,  Inc. is not assuming any of the  Company's
liabilities.  In connection with the Purchase Agreement, the Company and certain
shareholders, directors, and management will agree not to compete with Tree Top,
Inc. in processed  apple  product  lines for a period of three to ten years.  In
addition,  as part of the transaction,  the Company sold the Vacu-dry trademark.
Thus, the Company changed to its current name in December 1999.

During the first half of fiscal 2000, the Company  recorded a net after-tax gain
of $2.9  million  from  the sale of the  processed  apple  product  line and the
disposal of the remaining  product  lines of the  ingredients  segment.  The net
after-tax  gain included  $15,764,000 of proceeds from the sale offset by a) the
write-down of assets related to the  ingredients  segment to their estimated net
realizable  value (assets which were impaired as a direct result of the decision
to  discontinue  the segment and sell the apple product  lines),  b) costs to be
incurred in closing the discontinued segment (consisting  primarily of severance
costs,  professional  fees,  relocation costs and lease buy-outs),  c) estimated
operating  losses to be incurred  during the  wind-down  period and d) estimated
loss on sale of equipment at auction.

                                       7
<PAGE>
<TABLE>
<CAPTION>
Summarized historical information of the discontinued operations is as follows:

                                                                                                SIX MONTHS ENDED DECEMBER 31,
                                                                                                     1999            1998
                                                                                                 ------------    ------------
7<S>                                                                                              <C>             <C>
Income statement data:
     Revenues                                                                                    $  7,726,000    $  9,389,000
     Costs and expenses                                                                            (7,008,000)     (8,054,000)
                                                                                                 ------------    ------------
     Operating income                                                                                 718,000       1,335,000
     Income tax expense                                                                              (287,000)       (534,000)
                                                                                                 ------------    ------------
     Income from discontinued operations, net of income taxes                                    $    431,000    $    801,000
                                                                                                 ============    ============



                                                                                               DECEMBER 31,1999  JUNE 30,1999
                                                                                               ----------------  ------------
Balance sheet data:

Accounts receivable, net of reserves of $130,000 and $172,000                                    $         --    $  2,287,000
Inventories, net of reserves of $3,962,000 and $3,968,000                                             237,000       7,202,000
Prepaid expenses                                                                                           --         323,000
                                                                                                 ------------    ------------
     Total current assets of discontinued operations                                                  237,000       9,812,000
Property, plant and equipment, net                                                                         --       4,448,000
                                                                                                 ------------    ------------
     Total assets of discontinued operations                                                          237,000      14,260,000

Accounts payable                                                                                           --       3,388,000
Accrued payroll and related liabilities                                                                    --         812,000
Other accrued expenses                                                                                     --         180,000
Capital lease liability for computer system                                                           697,000         799,000
Provision for severance, transaction costs, wind-down costs and other
     liabilities related to the  decision to discontinue the ingredients segment                      960,000              --
                                                                                                 ------------    ------------
     Total liabilities of discontinued operations                                                   1,657,000       5,179,000

     Net assets (liabilities) of discontinued operations                                         $ (1,420,000)   $  9,081,000
                                                                                                 ============    ============

The inventories included above have been adjusted to net realizable value

Note 3 -

INVENTORIES - Inventories are stated at FIFO cost

Inventories at December 31, 1999 and June 30, 1999, consisted of the following:

                                                                                                   12/31/99         6/30/99
                                                                                                 ------------    ------------
                                            Finished goods                                       $    224,000    $    195,000
                                            Raw materials, & supplies                               1,260,000       1,696,000
                                            Reserve for obsolete inventory                           (362,000)       (378,000)
                                                                                                 ------------    ------------
                                                                                                 $  1,122,000    $  1,513,000
                                                                                                 ============    ============

Note 4 -

STATEMENT  OF CASH FLOWS - Interest  and income tax  payments  reflected  in the
Condensed Consolidated Statement of Cash Flows were as follows:

                                                                                                     1999             1998
                                                                                                 ------------    ------------
                                            Interest paid                                        $    166,000    $    198,000
                                            Income taxes paid                                    $    220,000    $    102,000
</TABLE>
                                       8
<PAGE>

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

SonomaWest Holdings,  Inc. (the "Company") is including the following cautionary
statement in this Form 10-Q to make  applicable  and take  advantage of the safe
harbor  provisions of the Private  Securities  Litigation Reform Act of 1995 for
any forward looking  statements  made by, or on behalf of, the Company.  Forward
looking  statements  include  statements  concerning plans,  objectives,  goals,
strategies,  future events or performance and underlying assumptions,  and other
statements  which  are  other  than  statements  of  historical  facts.  Certain
statements  contained  herein are forward looking  statements and,  accordingly,
involve risks and uncertainties  which could cause actual results or outcomes to
differ  materially from those expressed in the forward  looking  statements.  In
addition to other factors and matters discussed  elsewhere  herein,  these risks
and uncertainties  include, but are not limited to, uncertainties  affecting the
food processing  industry,  risks associated with  fluctuations in the price and
availability of raw materials, management of growth, adverse publicity affecting
organic  foods or the Company's  products,  and product  recalls.  The Company's
expectations,  beliefs  and  projections  are  expressed  in good  faith and are
believed  by  the  Company  to  have  a  reasonable  basis,   including  without
limitation,  management's  examination  of  historical  operating  trends,  data
contained in the Company's  records and other data available from third parties,
but  there  can be no  assurance  that  management's  expectations,  beliefs  or
projections  will result or be achieved or accomplished.  The Company  disclaims
any  obligation to update any  forward-looking  statements to reflect  events or
circumstances after the date hereof.

The financial statements herein presented for the quarters and six-month periods
ended December 31, 1999 and 1998 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 periods then ended. All adjustments during the
periods presented are of a normal recurring nature unless otherwise stated.

                                    OVERVIEW

Since the  Company  acquired  certain of the assets and  liabilities  of Made in
Nature,  Inc.  on June 11,  1998,  the Company  has  operated in three  business
segments:  industrial dried fruit  ingredients,  organic packaged foods and real
estate. The Company commenced a strategic  reorganization  upon the announcement
of the  proposed  sale of the  bulk of its  apple-based  industrial  ingredients
product  line in June  1999.  In August  1999 the  decision  was made to sell or
discontinue  all  product  lines  in  the  Company's   industrial   dried  fruit
ingredients  business segment.  As a result of these decisions,  the ingredients
business is  considered a  discontinued  operation  and its  operating  results,
results  of cash flows and net assets  are  reflected  outside of the  Company's
continuing operations.

                             DISCONTINUED OPERATIONS

In June 1999 the Company  announced an agreement  (subsequently  approved by the
Company's  shareholders  in July  1999),  to sell  the  bulk of its  apple-based
industrial  ingredients  product line to Tree Top,  Inc., of Selah,  Washington.
This product line  represented  55% and 81% of the Company's sales for the years
ended June 30, 1999 and 1998,  respectively.  At the same time, the Company also
decided to close its only apple processing plant in Sebastopol, California. This
sale,  which was recorded in the first  quarter of fiscal 2000,  is an important
element  of  the  Company's  strategic  plan  to  increase  the  return  on  its
investments  and  increase  shareholder  value by  exiting  businesses  with low
returns and high capital  requirements.  The transactions will provide financial
resources to support the Company's real estate and other business opportunities.

The terms of the sale included the payment of $12 million cash to the Company in
July 1999.  Tree Top also  purchased  related  product line  inventories of $1.9
million in September and October 1999.  The after-tax  gain on the sale was $2.8
million.  The net gain is based upon the cash proceeds and the disposal value of
assets not  acquired by Tree Top,  offset by  severance  and  relocation  costs,
wind-down costs,  transaction costs and identified  liabilities directly related
to the  decision  to  discontinue  the  business  segments.  These  costs may be
adjusted in the future  depending upon the final wind-down of the business which
is expected to run through June 30, 2000.

Following completion of the sale, the Company determined in August 1999 that the
remaining  product  lines in the  Company's  vacuum  ingredients  segment of its
business would be  discontinued  and held for sale.  These product lines include
the Company's vacuum dried ingredients,  Perma-Pak  long-term food storage,  and
drink mix businesses. As a result of these decisions, the Company has classified
this business segment as a discontinued business.  Accordingly,  the Company has
segregated  the net assets of the  discontinued  operations in the  Consolidated
Balance  Sheets at December 31 and June 30, 1999,  the operating  results of the
discontinued  operations in the Consolidated  Statements of Operations for three
and six  months  ended  December  31,1999  and  1998,  and the cash  flows  from
discontinued operations in the Consolidated Statements of Cash Flows for the six
months ended December 31, 1999 and 1998.

                                       9
<PAGE>


In  addition,  as  part  of the  transaction,  the  Company  sold  the  Vacu-dry
trademark. As a result, the Company adopted its new name in December 1999.

In the first half of fiscal 2000, the Company recorded  after-tax  earnings from
discontinued  operations  of $431,000.  The  after-tax  earnings  resulted  from
ingredients business sales of $7.7 million in fiscal 2000 versus $9.4 million in
fiscal  1999.  The  decline  in sales  was due to the  liquidation  of the apple
ingredients  business  during the first quarter of fiscal 2000 and a significant
decline in the sales of Perma Pak products.  The ingredients  business generated
$718,000 of operating  income in fiscal 2000 versus  $1,335,000  in fiscal 1999.
The Company is actively marketing all of its discontinued  product lines and has
presented offering information to interested parties. There can be no assurances
that  there will be a sale of all or any of the  remaining  product  lines.  The
anticipated pick up in demand for low moisture, shelf stable foods in the second
half of 1999 surrounding Y2K fears did not materialize. As a result, the Company
recorded  additional  reserves  of  $500,000  in  December  1999 to reflect  the
estimated  impairment of its Perma Pak inventories.  These reserves are included
in the gain (loss) on sale of discontinued business, net of income taxes, in the
accompanying  Condensed Consolidated  Statements of Earnings.  During the second
quarter of fiscal 2000 the  Company  completed  the sale of the  majority of its
remaining  production  equipment  associated with its  discontinued  businesses.
Finally,  the Company successfully  concluded  negotiations with Teamsters Local
624 regarding severance associated with the sale of the apple-based  ingredients
businesses.  Severance  payments  totaling  approximately  $300,000 were paid to
former union  employees in December 1999. The losses on equipment  sales and the
severance  payments  were  consistent  with the  amounts  provided  in the first
quarter of fiscal 2000.

                        RESULTS OF CONTINUING OPERATIONS

The Company's continuing lines of business consist of the sales and marketing of
organic packaged fruits and beverages  through the Company's  subsidiary Made in
Nature  Company,  Inc.  (MINCO) and the leasing and development of the Company's
real estate.  The Company continues to look for opportunities to drive costs out
of the  MINCO  operation,  reducing  staff by more  than  50% (to 5)  since  its
acquisition  in June 1998.  All  production  is  outsourced.  Expanding  product
distribution  beyond the  historical  specialty  health food  category into mass
supermarkets  has proven to be a challenge.  These  customers  typically  demand
significant  free goods and advertising  commitments to induce order flow, along
with full product  dating  protection.  A  significant  portion of the Company's
future  revenues  will come from the Company's  second  business  segment,  real
estate.  The Company  intends to develop its real estate  largely for industrial
rental. The current use permit for the Company's former production site requires
that the facility be used in part for the processing of locally grown crops. The
Company  is  attempting  to  broaden  the use  permit  to allow  other  types of
activities, but there can be no assurance that such efforts will be successful.

RESULTS OF OPERATIONS

Net sales consist solely of MINCO revenues, and were $1,151,000 and $535,000 for
the six and three months ending  December 31, 1999, as compared with  $1,258,000
and $565,000 for the corresponding periods in the prior year, declines of 9% and
5%, respectively.  The decreases in sales were due to decreases in both beverage
and packaged dried fruit product line sales.  The Company  continues to evaluate
all of its  options to bring  MINCO  operations  to  profitability,  including a
possible sale or merger of the business to gain operating scale efficiencies.

Rental Revenue  represents the Company's  leasing of warehouse  space in several
buildings and a yard as well as its former production facility. There are leases
with  more  than  a  dozen   tenants  that  have  varying   terms  ranging  from
month-to-month  to eight  years with  options  to extend.  Several of the larger
tenants have  notified the Company that they will be moving before June 2000. In
addition,  the Company is preparing its vacated production facility for leasing,
and has engaged a broker to assist in the marketing  effort.  Fiscal 2000 rental
revenues have increased $387,000 and $297,000,  or 139% and 180% for the six and
three months ended December 31, respectively, as compared with the corresponding
periods in the prior  year.  These  increases  are due to higher  market  rental
rates, CPI increases and the leasing of some previously vacant space, along with
annual true-up utility billings for some tenants performed in December 1999.

All Cost of Goods  Sold are  related  to the sales of Made in  Nature  products.
Profitability  was  impacted  in  the  current  quarter  by  the  sale  of  some
stale-dated  specialty  juice  concentrate  at a  $210,000  loss.  Without  this
transaction,  MINCO would have earned 23%  year-to-date  gross  margin in fiscal

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<PAGE>


2000 compared to 8% in the prior year. This  improvement in margin is the result
of  Company  efforts to lower its  distribution  costs and  customer  claims for
spoilage, along with better inventory management.


Selling,  general and administrative  expenses include only direct costs related
to continuing  operations and all general corporate  overhead costs. Only direct
selling,  general and administrative  costs related to the ingredients  business
were  allocated to  discontinued  operations in the  Consolidated  Statements of
Operations.  In the second  quarter and  year-to-date  of fiscal 2000,  selling,
general and administrative  expenses related to continuing  operations decreased
18% and 14% from the corresponding  periods of the prior year, to $1,273,000 and
$571,000, respectively. These declines were primarily due to significant efforts
to reduce  expenses for MINCO and reduced  corporate costs due to the downsizing
of the operation.

The effective tax rate for the second quarter and  year-to-date  fiscal 2000 and
the corresponding periods in fiscal 1999 was 40%, or approximately the statutory
rate after the federal benefit for state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

The Company  utilized  the $15.8  million  net  proceeds  from its  discontinued
operations  (including  $12 million from the sale of its apple product lines) to
reduce  borrowings  under the bank line of  credit  and to retire a  significant
portion of its debt.  Cash balances  increased from $548,000 at June 30, 1999 to
$8,643,000 at December 31, 1999. The Company retired two share  repurchase notes
in January 2000 to reduce long-term debt another $271,000.

Historically,   the  Company's  operating  capital  has  been  obtained  from  a
combination of internal and external  sources.  The largest  external source has
been a  revolving  line  of  credit  provided  by a bank  at its  prime  rate of
interest,  which is secured by the Company's  assets.  As of September 30, 1999,
the  Company  had no  outstanding  balance  on a  maximum  available  line of $2
million,  nor did the Company draw down this  facility  during the second fiscal
quarter.  This credit  facility  was  initially  scheduled to expire in November
2000. However, as a result of the sale of the discontinued operations,  the bank
amended the agreement in August 1999,  reducing the maximum line of credit to $2
million with an expiration  date of December 31, 1999.  The Company has no plans
to  renew  the  credit  facility,  as  internally-generated  cash  flow  and the
remaining  proceeds  from  the  sale  of  the  ingredients  business  should  be
sufficient to meet working capital needs for the coming year.

In fiscal 1998, the Company had performed a review of its information technology
(IT) systems and determined that they were not year 2000 compliant. As a result,
a new computer system with related  hardware was installed during fiscal 1999 at
a cost of $1.1 million.  The related IT  expenditures  were  partially  financed
through capital lease  arrangements of $840,000.  These leases were divided into
two  components:  one for hardware  for  $246,000,  and the other for  software,
including  installation by an outside consulting firm, for $594,000.  The leases
are  payable  over three and four  years,  respectively,  and  include a buy-out
option.  Management  feels that upon the sale and closedown of the  discontinued
operations,  the new system will far exceed the Company's  future  requirements.
Consequently, the existing system was written off in the quarter ended September
30,  1999,  and is  included  in the net  gain on the  sale of the  discontinued
business.  The Company  converted to a simpler and less expensive  system for an
investment  of less  than  $50,000  in  December  1999  that is also  year  2000
compliant.

Until  recently,  the  Company's  real estate  activities  had  consisted of the
leasing of an idle production facility and rental of a small portion of space in
its operating facility.  Most of the previously available space has been rented.
With the  closure  of the plant as a result of the sale of the  processed  apple
product lines,  the Company  intends to convert all of its former plant space to
industrial  rentals by outside  parties.  The new space  available  for  leasing
includes  a  mix  of  offices,   production   buildings  and   warehouses   plus
approximately  55,000  square  feet of cold  storage.  The  Company is  actively
seeking to attract  wineries and food  processors  to occupy the space,  and has
engaged a leading real estate  broker to assist in the  marketing and leasing of
the facility. It is anticipated that the facility will be fully leased in stages
over the next twelve months.

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<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 April 20,
1999,  included a  covenant  which  prohibited  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 line of credit expired
December 31, 1999 and the Company has no plans to renew it.

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

On July 26, 1999 holders of a majority of the Company's outstanding common stock
approved  by written  consent the sale of certain of the  intangible  assets and
some of the  equipment  related to the Company's  processed  apple product line.
Shareholders  holding 929,304 shares voted for the transaction and  shareholders
holding 16,856 shares voted against the transaction.

The Company's Annual Meeting of Shareholders was held on November 22, 1999. Gary
L. Hess, Roger S. Mertz,  Frederic  Selinger and Craig R. Stapleton were elected
directors. In addition, the following proposals were approved:

a.       An amendment to the Company's  Articles of  Incorporation to change the
         name of the Company from Vacu-dry Company to SonomaWest Holdings, Inc.
b.       An amendment to the Company's  Articles of  Incorporation  changing the
         corporate purposes and powers of the Company.
c.       An  amendment to the  Company's  by-laws to provide for a change in the
         authorized number of directors.
d.       An  amendment to the  Company's  1996 Stock Option Plan to increase the
         shares available for issuance under the Plan by an aggregate of 185,000
         shares to 275,000 shares.

The shares voted for, against, and abstain on these matters were as follows:

Proposal                              For        Against           Abstain
--------                              ---        -------           -------
Name Change                         951,587       11,865              794
Change in Purposes                  932,647       30,880              719
Amendment to By-Laws                890,402       52,744           21,100
Amendment to Option Plan            801,395      161,182            1,669


Item 6.  Exhibits & Reports on Form 8-K

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

Reports on Form 8-K

On August  5,1999 the Company  filed a Form 8-K  relating to the approval of the
transaction described in Item 4 above.

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<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:  February 22, 2000                 /s/ GARY L. HESS
                                         ---------------------------------------
                                             Gary L. Hess,
                                             Chief Executive Officer, President
                                             and Chief Financial Officer

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