Interfacing rotary encoder with Spartan 3 E

Hello all,

I am trying to interface rotary encoder with Spartan 3 E-board to 
generate a phase shift between two signals based on the count. It is 
interesting that it works some time and some time it does not show any 
shift. "theta" is the phase shift in the attached code and the four 
signals ar G1, G2, G3 and G4 as shown in the .png diagram. I would 
appreciate getting some guidance with the code in order to successfully 
generate phase shift.

Thank you