They eventually succumbed to F.C. Paços de Ferreira of Portugal, but hopes were high heading into this year's qualifiers.
After drawing 0-0 in Gibraltar last week against St Joseph's Larne hoped to finish the job at home, but they were dumped out as Julian Valarino scored the only goal of the game less than a minute after Mark Randall was dismissed with 12 minutes to go.
Lynch said it was a "huge disappointment" and admitted that they should be beating teams of St Joseph's quality.
"We're not going to shy away, tonight was a huge disappointment," he told the club's Youtube channel.
"We let the fans down, we let the club down, there's no getting away from that and I certainly won't do it.
"It wasn't good enough tonight. That's a team we should be beating and getting ourselves into the next round in Europe and we didn't do it, that's our fault.
"We take full responsibility for it, but it's important we don't bring that into our domestic campaign.
"We have to put it behind us quickly, and we have to try and get the fans back onside again.
"The only way to do that is hard work. We will get back on the pitch and start our work again.
"I didn't see that coming to be honest with you.
"I thought we started the game slowly but then we got fairly dominant and played some really good football.
"We were a little bit sloppy at the start of the second half, but we got ourselves back into it and were very dominant again.
"Then the sending off just changed the whole complexion of the game.
"We conceded a really stupid, soft goal and suffered for it.
"When you look at how they set up that was very much their game plan.
"They played a 5-4-1, they sat in there and made it extremely difficult for us to break down.
"I thought we created some really good chances in the first half, we could have and should have been a bit more clinical.
"It took us a bit of time to get going in the second half.
"When we got ourselves into it, albeit we didn't create as many chances as I would have liked, we were dominant in possession.
"But as I say the sending off, I don't know if it was mentally or whatever, it killed us.
"We struggled to pick ourselves up after that.
"We didn't ask enough questions, we didn't put enough balls in the box, we didn't put enough bodies in the box, we should have made it a lot more difficult for them than what we did.
"But it's one of those things which we have to deal with now. We have to go back and look at this again.
"We have to roll our sleeves up and try and get better day by day."
Lynch revealed they are trying to bolster their attacking options but admitted it's not straightforward.
"Would we like to bring in another striker and add a bit more creativity to our team? Yeah we definitely would," he said.
"It's something that we're really looking at doing.
"Wanting to do it and being able to do it are two different things though.
"It's about getting the right people and it's a work in progress for us."