. ACCRUED AND OTHER LIABILITIES

Accrued liabilities consisted of the following:

	September 30,
	2018		2017
Payroll and related	$	2,041,735	$	1,870,579
Deferred revenue		659,682		343,163
Accrued contract costs		197,034		197,034
Severance		152,730		-
Warranty reserve		99,216		104,518
Deferred rent		49,467		46,101
Total	$	3,199,864	$	2,561,395

Other liabilities - noncurrent consisted of the following:

	September 30,
	2018		2017
Deferred rent	$	1,663,058		-
Deferred extended warranty revenue		76,372		-
Total	$	1,739,430	$	-

Payroll and related

Accrued payroll and related consisted primarily of accrued bonus, accrued vacation, accrued sales commissions and benefits at

September

30,

2018

and

2017.

Deferred Revenue

Deferred revenue at

September 30, 2018

included prepayments from customers on current orders scheduled for delivery in the year ended

September 30, 2019.

Severance

Severance liability at

September 30, 2018

consisted

of accrued payments to former employees of Genasys payable during the year ended

September 30, 2019.

Deferred Rent

Deferred rent liability as

September 30, 2018

consists of the difference between the average rental amount charged to expense and amounts payable under the lease for the Company’s office space. Deferred rent also includes cash and amounts receivable from the landlord in the aggregate amount of

$1,712,525

to compensate for costs incurred by the Company to make the office space ready for operation (leasehold incentives). Leasehold incentives received from a landlord are deferred and recognized on a straight-line basis as a reduction to rent expense over the lease term.

Warranty Reserve

Details of the estimated warranty reserve were as follows:

	September 30,
	2018			2017
Beginning balance	$	104,518		$	243,423
Warranty provision		6,093			(70,946	)
Warranty settlements		(11,395	)		(67,959	)
Ending balance	$	99,216		$	104,518

The Company establishes a warranty reserve based on anticipated warranty claims at the time product revenue is recognized. Factors affecting warranty reserve levels include the number of units sold, anticipated cost of warranty repairs and anticipated rates of warranty claims. The Company evaluates the adequacy of the provision for warranty costs each reporting period and in the

fourth

quarter of fiscal

2018

decreased the accrued warranty liability by

$23,890

to an amount equal to estimated warranty expense for products currently under warranty.

Accrued contract costs

Accrued contract costs consist of accrued expenses for contracting a

third

party service provider to fulfill repair and maintenance obligations required under a contract through

2019

with a foreign military for units sold in the year ended

September 30, 2011.

Payments to the service provider will be made annually upon completion of each year of service. These services are being recorded in cost of revenues to correspond with the revenues for these services.