KENNESAW, Ga. (AP) _ An inquiry by the Securities and Exchange Commission into CryoLife Inc. and its handling of a recall order by the Food and Drug Administration is now a formal investigation, the company said in its latest quarterly report.

CryoLife spokesman Joe Schepers said Wednesday the company had been cooperating with the SEC and that the shift from ``inquiry'' to ``formal investigation'' in June had brought no real changes.

``This is just a continuation of what has already been going on since August 2002,'' he said.

The nation's largest supplier of living human tissue for implantation was ordered last August to stop distributing cadaver tissue. FDA officials said the company, based in Kennesaw, Ga., failed to adopt and follow safety procedures to keep fungus and bacteria from contaminating soft tissue.

The company resumed processing and distribution of all types of tissue after an FDA inspection determined the problems had been corrected.

The ongoing SEC investigation concerns the company's August 14, 2002 announcement of the FDA's recall order, according to the report.

The second-quarter report, which was issued late Tuesday, showed a steep net loss of $22.3 million, fueled partly by a reserve it set aside for potential legal claims, and also lowered its forecast for full-year revenue.

CryoLife shares closed at $5.25 on the New York Stock Exchange, down 87 cents or 14.22 percent, after tumbling 17 percent Tuesday.

___

On the Net:

http://www.cryolife.com