PVR texturetool build phase

I'm currently completing an iphone 3d programming book

The book says to add following python code into a build phase in xcode, to run the provided texturetool.

Book Quote

a. Leave the shell as /bin/sh.

b. Enter this directly into the script box:

BIN=${PLATFORM_DIR}/../iPhoneOS.platform/Developer/usr/bin  
INFILE=${SRCROOT}/Textures/Grid16.png 
OUTFILE=${SRCROOT}/Textures/Grid16.pvr 
${BIN}/texturetool -m -f PVR -e PVRTC $INFILE -o $OUTFILE

c. Add this to Input Files:

$(SRCROOT)/Textures/Grid16.png

Add this to Output Files:

$(SRCROOT)/Textures/Grid16.pvr

However when doing this I receive the following message.

Failed to load image
Failed to perform Encode
Command /bin/sh failed with exit code 1

Could anyone shed a light on this?

You have spaces in your directories!