counter_out <=# 1 ~(counter_out + 1);
This is not doing what you want it too and is just resulting in 'counter_out' holding a static value (both in and out of reset).
I might suggest that you've not simulated this. Doing so would have quickly pointed out your fault.
Firstly, remove the "#1" from your code. This means nothing to your MAX V device or any logic synthesizer.
Secondly, change the above statement to a simple
counter_out <= counter_out + 1;
Then, outside of that always block, deal with the inversion that the LEDs on your hardware require.
assign led = ~counter_out;
Finally, swap 'led' for 'counter_out' in your module's port list.
Cheers,
Alex
Honored Contributor
