Our sales of mobile data communications services are expected to increase substantially if, when and as orders are received under our contract with the U.S. Army and we penetrate other government and commercial markets for these services. Our sales are made to domestic and international customers, both commercial and governmental. A substantial portion of our sales is derived from a limited number of relatively large customer contracts, the timing of which cannot be predicted. Quarterly sales and operating results may be significantly affected by one or more of such contracts. Accordingly, we experience significant fluctuations in sales and operating results from quarter to quarter and, because our backlog is comprised in large part of a small number of large contracts, we expect such fluctuations to continue in the near future.
Sales consist of stand-alone products and systems.
For the past five years we have endeavored to achieve greater product sales as a percentage of total sales, because product sales generally have higher gross profit margins than systems sales. In the future, as our installed base of mobile data communications terminals is established, we expect an increasing amount of our sales will be attributable to the recurring revenue component of our mobile data communications services segment. We generally recognize income under contracts only when the products are shipped. Our gross profit is affected by a variety of factors, including the mix of products, systems and equipment sold, production efficiency and price competition. Selling, general and administrative expenses consist primarily of salaries and benefits for marketing, sales and administrative employees, advertising and trade show costs, professional fees and amortization of deferred compensation.