Improbable Co-Founder and CEO Herman NarulaCourtesy of ImprobableLONDON — SoftBank-backed Improbable on Wednesday posted a pre-tax loss of £64.8 million ($88.5 million) for the seven months leading up to Dec. 31, 2019, according to a filing on U.K. company register Companies House. It’s a sharp rise on the £39 million pre-tax loss reported in the year leading up to May 31, 2019.The London firm, one of SoftBank’s biggest bets in Britain, is aiming to develop large-scale computer simulations and “synthetic environments” that have applications in gaming and defense. Its core technology platform, or main product, is known as SpatialOS.Audited by PwC, the filing shows that Improbable had a turnover of £10.8 million during the latest period. Of that, £8.3 million came from the U.K., £2.4 million came from the U.S. and £87,188 came from the rest of the world. Revenue was up significantly on the £1.2 million it posted in the year that ended May 31, 2019, but the company is yet to release a blockbuster game.Cambridge origins Founded in 2012 by Cambridge computer science students Herman Narula and Rob Whitehead, Improbable has become a household name in the British start-up scene.But auditors said Improbable’s ability to “maintain or generate sufficient funds to continue developing and advancing the SpatialOS platform and future products” was among the company’s principal risks and uncertainties.They added that the firm’s $502 million Series B funding round in 2017, which was led by Japanese tech giant SoftBank, had “significantly de-risked” this concern in the near term but said the directors were aware that the group was not yet demonstrating self-sustaining profitability.The latest filing also shows that Improbable spent £26.4 million on research and development in the seven months to Dec. 31, 2019.During that period, the company’s headcount grew 60% to 487 and overhead costs increased as a result. Improbable spent £33.7 million on wages and salaries during the period, up from £26.8 million in the previous period. At present, the company has around 650 staff.Improbable also spent £4.4 million on leasehold land and buildings, and £4.1 million on computer equipment.Notable acquisitions during the period include Seattle-based Midwinter Entertainment in Aug. 2019 and The Multiplayer Guys, which is based in Nottingham, England, in Sep. 2019.In Feb, 2020, it also acquired Munich cloud firm Zeus, which provides managed hosting services to the gaming industry.Pivot to defenseImprobable said it is developing synthetic environments for a wide range of defense partners across NATO, adding that the environments will “transform military training, planning and decision support.”Improbable has been developing wargaming software that can be used to run military simulations. Indeed, it has signed several multi-million dollar contracts with the U.K. Ministry of Defence and the U.S. Department of Defense.The U.K. Ministry of Defence has spent over £25 million on contracts with Improbable, according to The Financial Times. Last August, the newspaper reported that U.K. defense chiefs are trying to fast-track the company’s technology, which could theoretically be used to create a digital replica or a virtual twin of the U.K.Improbable started out as a gaming firm and the company’s shift to defense has presented some employees with a moral dilemma.”I got a little bit uncomfortable when the first party game studios started getting pulled into the defense stuff,” one former employee told CNBC. They asked to remain anonymous due to the sensitive nature of the discussions.