alpha Test Treshhold throwing error when alpha > 0

Hello. I'm having problems with alphaHitTestMinimumThreshold property. The application runs normally if the alpha of the image is not greater than 0. Once it hits the solid parts, it quits with the following error:

"Using alphaHitTestMinimumThreshold greater than 0 on Image whose sprite texture cannot be read. " + e.Message + " Also make sure to disable sprite packing for this sprite."

Here are the import settings for the texture and the panel with the texture. Once the mouse hovers over the head filler, the application quits.

Pretty weird since it's able to read the alpha correctly, only it crashes when it detects anything other than transparent. Any help would be appreciated, and thanks in advance!