This is only the beginning of a fix. The issue arises when the full path contains a directory name with a space in it. This is due to missing double quotes around the paths. There seems to be more instances of this issue in the actual configuration file, but that beast is too big for me to tackle. But it is a pretty serious issue that should be addressed pretty soon so people with spaces in their dirs don't just think your module doesn't work.
I believe this is the complete fix. Worked for me at least.
Merge pull request #13 from djak250/double-quote-path

Double quote path
Cleaned up config file
Advanced version number
update package.json to require at least node version 0.8.0
Update package.json
expose derived key in hash/verify functions
update documentation
update package.json (version increase: 1.7.5)