The Bombers struggled onfield, winning just seven games and finishing 14th, then sacked and paid-out coach Matthew Knights who had two years remaining on his contract after an extension at the end of 2009.
Despite the loss, the club says it is in a strong financial position, with $1.3 million dollars in cash reserves and net assets of over $20 million.
Essendon CEO Ian Robson said the club's poor onfield performance - which was a significant factor in the sacking of Knights - was partially to blame for the loss.
"While it is of course greatly disappointing to report a loss, it is worth noting that prior to the deduction of all non-cash items such as depreciation, the club generated a trading cash surplus," he said.
"These underlying operating circumstances were further exacerbated with the financial impact of the decision to implement a new coaching model and accelerated depreciation charges related to IT systems development."
