The visitors inflicted a 1-0 victory in the hands of the Soldiers at Afraha Stadium on Wednesday.
Nyaudo rued missed chances after the home side were severely punished by a late Christopher Masinza goal.
“It was a bad day for us; not so much to celebrate from a game you drop three points to a lousy goal very late in the game.
"We created very many chances, like three clear ones and failed to use them and that came to cost us here,” Nyaudo lamented in a post-match interview as quoted by the club’s website.
A fine run of form in March saw Ulinzi Stars heads to Wednesday's game as clear favorites and the fact the former champions had not lost at home this campaign added the punch.
That record, however, counted for nothing in the end but the coach absolved the players of claims of being overconfident.
“I don’t think there was a case of overconfidence from my players; we knew it was going to be tough and I prepared them both on and off the pitch for this (game). It was just a small lapse in the defence and much as it is unfortunate, we take the lessons and seek improvement.
“We have ourselves to blame because we even talked about these issues and we all knew Vihiga is a wounded team fighting for a first win and there are players in there who would play for their coach.”
Ulinzi Stars will make a long trip to the Coast to take on Bandari FC in Mombasa on Sunday, April 8.