Reece Mitchell and Kasey Palmer did the damage to fire the visitors into a 2-0 lead inside 10 minutes of the quarter-final encounter.
Ola Aina then unleashed an incredible strike from halfway for 3-0 at the break but the tie was far from over.
The lads came out inspired in the second half, took control and pulled back to 3-2 with goals from Anton Walkes and Will Miller.
Unfortunately, a third goal proved elusive and as we pushed forward, Chelsea caught us twice in the final minutes for the final 5-2 scoreline.
"Two of those first three goals were gifted to them and by conceding so early, we didn't give ourselves a chance to play our way into the game," said coach Ugo.
"We'd had warnings but didn't learn and as a team, that gave us a mountain to climb.
"But we made a game of it, certainly. In the second half we had them on the rack at 3-1 and when we got to 3-2 my only thought was that we would go on to get the third goal and perhaps even win it.
"It was at the back of my mind, just something telling me that if we stayed fully concentrated we might just do it. But then the fourth goal ended it for us.
"We've spoken frankly afterwards because it's getting to an important stage now. We all make mistakes, players will always make mistakes, but it's how these lads react that matters now because the standards are so high.
"There were individuals who showed quality and spirit and some players have performed better than others. Hopefully, those players will respond in the right way and we'll look back at this as an important moment."