ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

	December 31,		September 30,
	2018		2018
Payroll and related	$	993,116	$	2,041,735
Deferred revenue		342,649		460,086
Customer deposits		183,334		199,596
Accrued contract costs		295,551		197,034
Severance		73,679		152,730
Warranty reserve		115,045		99,216
Deferred rent		76,244		49,467
Total	$	2,079,618	$	3,199,864

Other liabilities-noncurrent consisted of the following:

	December 31,		September 30,
	2018		2018
Deferred rent	$	1,832,884	$	1,663,058
Deferred extended warranty revenue		83,255		76,372
Total	$	1,916,139	$	1,739,430

Payroll and related

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

Deferred Revenue

Deferred revenue consists primarily of extended warranty obligations and prepayments for software support agreements.

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

March 28, 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.

Severance

Severance liability at

December 31, 2018

and

September 30, 2018,

consisted

of accrued payments to former employees of Genasys, payable during the year ending

September 30, 2019.

arranty Reserve

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

	December 31, 2018			September 30, 2018
Beginning balance		99,216		$	104,518
Warranty provision		20,618			6,093
Warranty settlements		(4,789	)		(11,395	)
Ending balance	$	115,045		$	99,216

Deferred Rent

Deferred rent liability as of

December 31, 2018

and

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 leasehold incentives from the landlord in the aggregate amount of

$1,909,128

December 31, 2018

to compensate for costs incurred by the Company to make the office space ready for operation. 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.