The chances of Zynga holding its IPO in the near future have dropped considerably after the company released financial results in which its quarterly profits dropped by more than 90 percent.

In an amended IPO filing, the social gaming firm revealed that profits in the three months to June 30 had dropped to $1.4 million from $16.8 million in the previous quarter. However, its should be noted the company made several acquisitions in those 3 months and around 600 staff were added to the payroll during the quarter. This contributed to an increase in administrative expenses from $27.1 million to $54.2 million.

Overall, revenues grew to $279.1 million from $242.9 million in the previous quarter — more than double the $130.1 million revenue from the same quarter in 2010. The number of average daily users fell to 59 million, from 62 million in the previous quarter.

Zynga says that one of the main reasons behind the dip in profits was due to the lack of new games it launched in the first half of 2011 — the first major game it released this year was “Empires and Allies.” However, the company has since remedied that with the launch of “Adventure World” and the imminent release of “Mafia Wars 2.”

Zynga believes that the valuation of the company has risen to $14.05 billion — it says the share price has risen from $13.96 in March to $17.20 in August. However, the chance of its IPO actually taking place has dropped to 75 percent from 80 percent, with market volatility being cited as the main reason - we reported this last month.

To me, it seems pretty clear why Zynga thinks its valuation has risen, despite a drop in profits and daily user numbers. Sure, operating profit is down, but there are good reasons for that. I doubt Zynga will be too concerned with the drop in daily user numbers either as the company relies on a small percentage of dedicated players who purchase virtual goods for most of its income. I can’t imagine that too many of the people who have stopped playing Zynga games fall into that category. The increase in revenues is the big takeaway here and probably the main reason for the inflated valuation — Zynga might be less profitable than it was earlier this year, but it’s certainly creating the foundations to become an even larger company.