Override Rug no texture in game

I am trying to do an override set of recolors of the Rugs-N-Camaraderie rug from My First Pet Stuff.

I am using a DDS texture with an alpha (using the games alpha from that shape rug [as pictured])

When I put the .package file in my game the texture on the rugs are missing and all black (when placed indoors). Outside the rugs look fine.

and this is how I see it in S4S

Here is the package file: .Package