Datronics Engineers, Inc. (defendant) entered into several transactions creating “spin-offs,” transactions with private companies in which the private companies would be absorbed by a corporation that had been newly created by Datronics. The principals of the private company would then receive the majority of the shares of the new corporation, with the remainder going to Datronics, which then either held them or distributed them to employees. The Securities and Exchange Commission (plaintiff) sought an injunction preventing Datronics from continuing in the sale of what it alleged to be unregistered securities. The district court ruled in favor of Datronics, stating that a sale of securities did not occur because the stock was not exchanged for value. The SEC then appealed to the Fourth Circuit Court of Appeals.