diff --git a/dev_docs/SESSION_STATE.md b/dev_docs/SESSION_STATE.md
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@@ -1,13 +1,80 @@
 # CURRENT AI WORKING SESSION — HANDOVER
 
 **Active AI:** Claude Haiku 4.5
-**Last Updated:** 2026-04-20 (Session 12 - Code Quality Fixes Complete)
-**Current Version:** v0.2.0 (major design overhaul + photo API security fixes)
-**Branch:** dev (all changes committed and tested)
+**Last Updated:** 2026-04-20 (Session 13 - Phase 2 Task 2: ManualCropUI Complete)
+**Current Version:** v0.2.0 (photo API + manual crop UI implementation)
+**Branch:** feature/phase2-photo-ui (Phase 2 Task 2 complete, ready for merge)
 
 ---
 
-## WHAT WAS COMPLETED THIS SESSION (Session 12: Task 4 - Photo API Critical Fixes)
+## WHAT WAS COMPLETED THIS SESSION (Session 13: Task 2 - Manual Crop UI with Drag Handles)
+
+### Manual Crop UI Implementation — COMPLETE ✅
+
+**Objectives Achieved:**
+1. ✅ **useCropHandles Hook** — Pure logic hook managing crop state and drag operations
+   - Drag handle tracking (8 handles: 4 corners + 4 edges)
+   - Real-time bounds calculation during drag
+   - Constrain within image bounds (no dragging outside)
+   - Minimum crop size enforcement (100x100px)
+   - Touch & mouse event support
+   - Initial crop constraint validation
+
+2. ✅ **ManualCropUI Component** — Interactive crop preview with draggable handles
+   - Responsive image scaling to container width
+   - Semi-transparent overlay outside crop box (black/40 opacity)
+   - Cyan bounding box (border-cyan-400) with visible edges
+   - 8 draggable handles with hover feedback (scale/highlight)
+   - "Use Full Photo" button to clear crop bounds
+   - Real-time onCropChange callbacks to parent
+   - Error handling for image load failures
+   - Touch + mouse event support (mobile + desktop)
+   - TypeScript strict mode compliant
+
+3. ✅ **Comprehensive Tests** — 52 test cases (26 hook + 26 component)
+   - Hook Tests: initialization, setCrop, resetCrop, all 8 drag operations, constraints, endDrag, edge cases
+   - Component Tests: rendering, handles, overlay, callbacks, button, error handling, dimensions, touch/mouse, responsive behavior, size enforcement, bounds display
+
+**Files Created:**
+- `/frontend/hooks/useCropHandles.ts` (223 lines) — Crop state and drag logic
+- `/frontend/components/ManualCropUI.tsx` (295 lines) — Interactive crop preview UI
+- `/frontend/tests/hooks/useCropHandles.test.ts` (386 lines) — Hook test suite
+- `/frontend/tests/components/ManualCropUI.test.tsx` (407 lines) — Component test suite
+
+**Test Results:**
+- Hook Tests: **26/26 passing** ✅
+- Component Tests: **26/26 passing** ✅
+- Full Suite: **364/364 tests passing** (13 test files, zero regressions) ✅
+- TypeScript Strict Mode: **Zero errors** ✅
+
+**Commit Created:**
+- `b2e2daf4` feat(phase2): implement ManualCropUI with drag handles
+
+**Success Criteria — ALL MET:**
+- ✅ Component renders photo and draggable handles
+- ✅ All 8 handles (4 corners + 4 edges) fully draggable
+- ✅ Real-time crop bounds emitted to parent via onCropChange
+- ✅ Constrained within image bounds (no dragging outside)
+- ✅ Minimum crop size enforced (100x100px)
+- ✅ "Use Full Photo" toggle works (clears crop)
+- ✅ Works on touch (mobile) and mouse (desktop)
+- ✅ All tests passing (52 new tests)
+- ✅ TypeScript strict mode compliance
+- ✅ No console errors
+
+**Key Features Implemented:**
+- Drag handle positioning calculated via scale factor
+- Global event listeners for smooth cross-element dragging
+- Touch event support with clientX/clientY calculation
+- Semi-transparent overlays (top, bottom, left, right)
+- Minimum 100x100px crop size enforcement
+- Real-time bounds display (debug info)
+- Responsive handle sizing (12px width/height)
+- Cyan border with white handle indicators
+
+---
+
+## WHAT WAS COMPLETED LAST SESSION (Session 12: Task 4 - Photo API Critical Fixes)
 
 ### Critical Code Quality Issues Fixed — COMPLETE ✅