. ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

	December 31,		September 30,
	2017		2017

Payroll and related	$	847,042	$	1,870,579
Deferred revenue		446,913		268,580
Accrued contract costs		345,551		197,034
Warranty reserve		188,308		179,101
Deferred rent		30,734		46,101
Total	$	1,858,548	$	2,561,395

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 December 31
	2017			2016
Beginning balance	$	179,101		$	356,984
Warranty provision		12,361			9,696
Warranty settlements		(3,154	)		(12,742	)
Ending balance	$	188,308		$	353,938

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.