Turkey were beaten 2-1 at home by the Czechs in Euro 2016 Group A qualifying in Istanbul, despite dominating proceedings for large periods of the match.
Umut Bulut gave Turkey an eight-minute lead, though the hosts paid the price for not turning possession into goals as Czech Republic netted two unanswered goals to escape with victory.
Speaking post-game, Terim said Turkey - winless in qualifying thus far - failed to recover after conceding the equaliser within eight minutes of hitting the front.
"After conceding two bad goals, we lost our composure mentally and – especially after the hour-mark – physically too," Terim told reporters.
"When you concede from your opponents' first attack, it hits you mentally.
"In the second half, we started off with enthusiasm, but after their second goal, we tailed off mentally and physically."
Meanwhile, goalscorer Bulut apologised to the team's supporters.
"We are so sorry. I feel we didn't deserve to lose. We had some great chances, especially after the first goal – had we scored one of them, it could have been a lot different," said the striker.
"I am really sorry, all the team, we are all really sorry."
Turkey, surprisingly, sit bottom of the group without a point from two fixtures.
The Turks were comprehensively beaten 3-0 in Iceland last month but Terim has not given up hope of qualifying.
"Of course, we did not expect [to have lost both of our games]," he said.
"After losing against Iceland, I congratulated our opponents and said they deserved to win, but it is not the same this time.
"Especially in the first 45 minutes, we played such wonderful football and we deserved to be in front. But in international football, even tiny mistakes get punished.
"We're bottom of the group. We have to recover quickly and get some points. We have eight games to play. We cannot abandon hope."
