LS-DOS is trying to read the command interpreter SYS file, and it's hitting a directory read error. Do you have another disk? The most typical cause for an Error 11H is improper data address marks on the directory track. Is this with an image on an HxC? If so, you can check for the proper deleted-data address marks easily enough on your PC.
For the benefit of the whole group, I just want to say that LS-DOS 6.3.1A for Model II/12 is not nor has it ever been a really stable OS. Many patches need to be made to it to make it stable; some are the same as the Model 4 version's patches to get up the level F, but some are unique to the Model II/12 hardware and have not even been developed yet.
Misosys did sell it, but I still remember the release being billed as 'unsupported.' The release of 6.3.1A for II/12 was very late in the TRS-80 lifecycle, one must remember, and by that time (1990) things were getting really slim. Now, don't get me wrong, I'm glad Roy released it. It just wasn't fully baked, especially on the Model 12/16B/6000 hardware. It needs some serious TLC by someone with the time and the hardware (you need a good working II and a good working 12/16B/6000 to do this correctly). Also note that the source for 6.3.x for the II/12 has never been fully released (there is a 6.2.0 ac beta source out there) and much reverse-engineering will have to be done to get the source up to 6.3.1A. Then you really would need to treat Frank Durda to a fancy dinner and try to get some of those undocumented hardware glitches documented (as the maintainer of z80ctl for Xenix, Frank is the authority on the hardware issues, and there are clues in his comp.sys.tandy postings to some of the misbehavior of the hardware, but it's not fully documented by any means).
While many times I wish I had kept the machines I had, I have to remind myself of all the problems I was having with them at the last (where 'the last' was 1999). The Model 12 I used to copy the LS-DOS disks I had that I sent to Tim Mann for imaging back in June of 1999 was beginning to have issues with both its TM848 drives. At that point in time neither the 16B I had nor the 6000 I had would boot.