The decision cost them the Southern Combination League Premier Division title and promotion to the Bostick League (formerly known as the Ryman League).
Saunders had been led to believe the appeal would overturn the Sussex FA’s punishment.
He said: “I feel let down by the FA. It is awful, a huge disappointment.
“Something happened down the line and it seemed everything was going in our direction; people of real importance were on our side and saying there were were mitigating circumstances.
“We were led to believe we had a really good case.
“The player (Melford Simpson) was booked while playing for another club, Fisher, then left to join us and never paid his fine.
“Melford Simpson didn’t appear on the Whole Game System when we ran our check when he signed, March 21. Then it went up on the discipline section of the site on March 24 but no-one notified us.
“Melford got booked when he played his first game for us on April 1, so why was it still not flagged up that we had played a banned player?”
Saunders admits waiting for the appeal ruling has caused problems in securing his squad for the forthcoming season but he plans to make up time by making some new signings in the next seven days.
He said: “You can’t talk to players and when they ask us which division will we be playing in, we have to say ‘we don’t know yet.’
“We are lucky we have kept all the squad except two players - Trevor McCreadie has signed for Three Bridges and Josh James has joined Horsham.
“We have six new players coming to pre-season training this week and intend to make two or three new signings to replace those who left next week.”