A 3-3 draw after extra-time forced the match to spot-kicks, just like their quarter final against Armadale Thistle.
However, this time around they lost 3-0 in the shoot-out to crash out.
Speaking to the Herald, he said injuries played a part in losing the tie: “Going through the 90 minutes I thought we did more than enough to see it through.
“We were probably just a little short tonight in terms of numbers and injuries hampered us tonight.
“David Grant was the main one for us up top and when Marty went off it really turned the match away from us. Keir Stevenson was also carrying an injury so we were down to the bare bones.
“One positive was the amount of younger players we had on the pitch and that bodes well for the future.
“We fell short in the end but I cannot fault the effort or application of each player out there tonight and they gave everything.
“It would have been a great way to end the year and I hope Livingston enjoy the big day, I just wish our guys would have got there because they deserve it.”
He added: “Penalties are a lottery and I wouldn’t go into any single player because to put your hand up and have the guts to take one is the sign of great character.
“I won’t be critical of that but what I said to them was to take a bad day like this and remember it to make sure you don’t want to feel like it again.”
The Pace’s East of Scotland Football League first division conference A campaign ended last weekend, with the side finishing third on 63 points, just a point off second spot.
“We’ve competed well this year and our league campaign was excellent, we were one point of second place,” Smith said.
“Any defeat has been close and we haven’t been turned over by anyone, even those in higher leagues in the cups.
“In some of the big games we have been just on the other side of the line so that is something we need to fix.”
Dunipace's goalscorers against Livingston were Danny Ashe, Jordan Herron and substitute Jamie Lapsley.