In an email sent on December 23, the company founders notified investors that the Kickstarter campaign would be cancelled and that those who wanted a refund should notify the company within 30 days.
The Kickstarter campaign attracted a total of 5,948 contributors, who pledged a total of $262,000 to campaign.
More than 650 of these backers come from New Zealand.
Callum Handley told the Herald that around half of these contributors have already requested a refund and he expects most to follow.
He did, however, remain optimistic, saying that around 500 backers had also confirmed interest in supporting the change in direction for the business.
Numerous backers to have requested a refund have taken to the comments section on the Kickstarter campaign to express frustration at not having yet received their refunds.
"I sent a refund request a while ago but not heard anything yet," said investor Mark Right.
Another backer who contacted the Herald directly similarly expressed concerns about not having yet received a refund.
The backer said he had contacted Magpie numerous times but had still not received a response.
Handley conceded that the process was taking longer than expected but said the business was taking steps to reimburse every backer to have requested a refund.
"It's unfortunate that Kickstarter does not allow you to reimburse all backers with one button," Handley said.
"You have to manually process each backer one by one. So that's what we are doing."
The Kickstarter announcement from Magpie says that all those to have requested a refund will be reimbursed by January 26, 2017.
Handley stressed that this move was not a case of the founders giving up on the initiative but that it was rather a strategic shift due to changing market conditions.
He said that while the product was unique when it first launched, the landscape has changed quickly during the past six months.
"A lot of competitors have emerged, including Samsung, launching a device exactly like ours," he said.
Handley said that the founders had to pick a path or risk developing a product that failed shortly after arriving in consumers' hands.
"It would have been far worse, we think, to have delivered the devices and then a few months later turned them all off and shut down the service," he said.
Rather than competing in the consumer space, Handley said the business would now work toward offering its services to other businesses.
Two areas the company is currently focusing on are helping companies keep track of high-value items leased to third parties and providing end-to-end tracking of products throughout the supply and distribution chain.
Magpie isn't the first Kickstarter business to frustrate backers.
The crowd-funding platform has faced a number of controversies in recent years, with entrepreneurs not delivering on promises set out in their campaigns.
Last year, there was the high-profile case of the 'Supercard' startup Plastc, which filed for bankruptcy after raising US$9 million (NZ$12 million) on the platform.
None of the backers ever received the product nor a refund.
Handley said Magpie will not become another example of investors being left out of pocket.
"We are working to ensure backers wanting a refund will get one," he said.
