ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

	March 31,		September 30,
	2018		2017

Payroll and related	$	1,214,039	$	1,870,579
Deferred revenue		1,028,497		268,580
Accrued contract costs		474,068		197,034
Severance		327,937		-
Acquisition escrow liability		185,250		-
Warranty reserve		169,204		179,101
Deferred rent		15,367		46,101
Total	$	3,414,362	$	2,561,395

Payroll and related

Payroll and related consists primarily of accrued vacation, bonus, sales commissions, and benefits.

Deferred Revenue

Deferred revenue consists primarily of prepayments from customers in advance of product shipment.

Warranty Reserve

Changes in the warranty reserve and extended warranty were as follows:

	Three months ended						Six months ended
	March 31,						March 31,
	2018			2017			2018			2017
Beginning balance	$	188,308		$	353,938		$	179,101		$	356,984
Warranty provision		-			101,673			12,361			111,369
Warranty settlements		(19,104	)		(6,470	)		(22,258	)		(19,212	)
Ending balance	$	169,204		$	449,141		$	169,204		$	449,141

Accrued contract costs

The Company has contracted with a

third

-party service provider to administer the required services under the terms of a repair and maintenance agreement with a foreign military. This payment is made in arrears for each contract year ended

March 26.