Magic Leap CEO Rony Abovitz. Getty The future of Magic Leap, a quickly expanding startup valued at $4.5 billion that's developing a futuristic pair of computer glasses, depends on releasing its still-in-development, secret product to the public.

For years, Magic Leap has promised to release a set of smart glasses that overlays computer graphics on the real world, a technology usually referred to in Silicon Valley as "augmented reality."

Ahead of a board meeting planned for next week, Magic Leap's "whole engineering group is scrambling" to produce a working prototype of Magic Leap's glasses — a prototype the company has been calling the "PEQ" — a person familiar with Magic Leap's development process told Business Insider.

The prototype will be presented to board members, and sources say the meeting is being viewed as a milestone in the product's development — a chance to prove that Magic Leap can shrink its technology to fit inside the smaller form factor that will be released to the public. They say the demo is currently in "decent" shape.

But as recently as January, the glasses prototype that is supposed to represent Magic Leap's all-in-one product prototype is nonfunctioning and empty, according to people who have seen presentations from Magic Leap.

The current prototype Magic Leap is showing has two "belt packs" attached to the glasses with wire. One pack contains the device's battery, and the other has its computing power. Magic Leap decided to split the packs because of thermal concerns, according to a person present during a demonstration. Former Magic Leap employees have said heat was an issue with the device. A patent drawing by Magic Leap showing a belt pack attached to the glasses. USPTO

The packs were described to Business Insider as "pretty bulky," or about the size of a soda can, and larger than the patent drawings Magic Leap has included in filings.

The Information reported in December that a prototype of the "PEQ" device that Magic Leap's CEO showed a reporter was hollow, and that the company gave its demos through a headset hooked up to a desktop computer, raising questions about whether Magic Leap's technology could be sufficiently miniaturized and productized to fulfill the company's promises.

"Our PEQ systems (product equivalent) are in both hardware and software agile build cycles," Magic Leap CEO Rony Abovitz wrote in a blog post in January. "Our first system will be the first step towards a really cool dream. Of flying squirrels and sea monkeys and rainbow powered unicorns. Of most anything you can imagine."

The computer-driven demos are compelling, former employees said. One demo Magic Leap gives to potential employees and partners is "Star Wars"-themed — the user is placed on Hoth, the ice planet, among giant AT-AT robots.

The price for the final device, which could be launched a year after a developer's kit, is likely to be between $1,000 and $2,000, according to former employees. One former employee said the device would likely cost slightly more than "a fully loaded iPad Pro."

Former employees say they expect the company to release a developer's kit this year, the first step toward a commercial release, although some have said an internal "this year" timeline goes back to 2014.

A Magic Leap representative declined to comment for this article.

How much runway?

Beyoncé. Getty

The size and complexity of Magic Leap's operations suggest the company may need to raise more money before bringing its product to market, even after raising $1.4 billion from investors including Google, according to former employees.

Magic Leap has sprawling operations — it said in November it had at least 800 employees, and it's growing rapidly.

Magic Leap has multiple offices in southern Florida and Silicon Valley, as well as outposts in Seattle; Boulder, Colorado; Dallas; Austin, Texas; and Israel.

Focus may be an issue for the company, former employees said. For example, Magic Leap is investigating businesses related to healthcare although its underlying technology is not yet finished. Several of Magic Leap's patent applications related to healthcare were published earlier this year.

Magic Leap is seeking not only to launch a hardware product — the glasses — but also to develop the software and content that runs on it. Hundreds of its employees are working on content such as videos and games for the still unreleased device.

Other former employees describe a culture that caters to VIPs. They said Magic Leap's leadership would clear out its Dania Beach, Florida, office, sometimes multiple times a month, to give demos to celebrities, investors, and other important people.

Some who saw the device, like Steven Spielberg, were pitched to make content for it. But others, like Beyoncé — who received a personalized "mermaid" Magic Leap demo, which the team created on short notice, and was bored by it — were more of a reflection of Abovitz's desire to connect with celebrities than anything directly related to the company's business, former employees said.

Additional fundraising might also allow current and former employees to sell their shares to secondary investors. Magic Leap had secondary liquidity events after its last two fundraising rounds. The Information reported in January that private investors were rethinking the price they are willing to pay for Magic Leap stock.

In some cases, the stock is trading for less than the $23 per share it was valued at during Magic Leap's last round of funding in February 2016. Magic Leap is reluctant to approve transfers of its stock.

Magic Leap is the best-capitalized augmented-reality startup and is being watched by rivals including ODG, Meta, and Microsoft, which have released and demoed their smart glasses publicly, as well as companies like Facebook and Google, which have AR ambition of their own.

One AR executive told Business Insider last month that he thought Magic Leap was "smoke and mirrors," pointing out that the technology hasn't been publicly seen.

Know anything about Magic Leap? Contact the author at kleswing@businessinsider.com.

Editing and additional reporting by Steven Tweedie.