diff --git a/dev_docs/SESSION_STATE.md b/dev_docs/SESSION_STATE.md
index bc20a295..612b8714 100644
--- a/dev_docs/SESSION_STATE.md
+++ b/dev_docs/SESSION_STATE.md
@@ -1,32 +1,34 @@
 # CURRENT AI WORKING SESSION — HANDOVER
 
 **Active AI:** Claude Haiku 4.5
-**Last Updated:** 2026-04-19 (Session 2 - Code Refactoring)
+**Last Updated:** 2026-04-19 (Session 3 - Phase 1 Completion)
 **Current Version:** v1.10.16 (version saved and merged to master)
-**Branch:** refactor/ai-friendly-v2 (Phase 1: Hook Extractions In Progress)
+**Branch:** refactor/ai-friendly-v2 (Phase 1: ✅ COMPLETE)
 
 ---
 
-## STATUS: 🟡 IN PROGRESS — REFACTORING PHASE 1 (HOOK EXTRACTIONS)
+## STATUS: 🟢 COMPLETE — REFACTORING PHASE 1 (HOOK EXTRACTIONS)
 
-### Phase 1 Hook Extraction Progress
-**Baseline:** 332 tests passing (291 Vitest + 41 Pytest)
+### Phase 1 Hook Extraction — ALL COMPLETE ✅
+**Final Result:** 332 tests passing (291 Vitest + 41 Pytest)
 
-**Completed Extractions:**
+**Frontend Hooks (5):**
 1. ✅ `frontend/hooks/useScanner.ts` — Scanner state, mode, OCR matching (from page.tsx)
    - Commit: `5b8c6039` refactor: extract useScanner hook from page.tsx
 2. ✅ `frontend/hooks/useStockAdjustment.ts` — Stock adjustment logic (from page.tsx)
    - Commit: `f5441a7c` refactor: extract useStockAdjustment hook from page.tsx
 3. ✅ `frontend/hooks/useSync.ts` — Sync operations and inventory refresh (from page.tsx)
    - Commit: `6dfc76ad` refactor: extract useSync hook from page.tsx
+4. ✅ `frontend/hooks/useInventoryFilter.ts` — Filter state & search (from inventory/page.tsx)
+   - Commit: `cf45437b` refactor: extract useInventoryFilter hook from inventory/page.tsx
+5. ✅ `frontend/hooks/useAIExtraction.ts` — AI wizard logic (from AIOnboarding.tsx)
+   - Commit: `a520b1ba` refactor: extract useAIExtraction hook from AIOnboarding.tsx
 
-**Remaining Frontend Hooks (Phase 1):**
-4. ⏳ `frontend/hooks/useInventoryFilter.ts` — Filter state & search (from inventory/page.tsx)
-5. ⏳ `frontend/hooks/useAIExtraction.ts` — AI wizard logic (from AIOnboarding.tsx)
-
-**Backend Splits (Phase 1):**
-6. ⏳ `backend/routers/auth.py` — LDAP auth & login endpoint (split from users.py)
-7. ⏳ `backend/routers/sync.py` — Bulk sync endpoint (split from operations.py)
+**Backend Routers (2):**
+6. ✅ `backend/routers/auth.py` — LDAP auth & login endpoint (split from users.py)
+   - Commit: `90e9a606` refactor: split LDAP auth into backend/routers/auth.py
+7. ✅ `backend/routers/sync.py` — Bulk sync endpoint (split from operations.py)
+   - Commit: `6dc300d3` refactor: split bulk-sync into backend/routers/sync.py
 
 **Test Status After Each Extraction:**
 - All tests passing (291 frontend + 41 backend = 332 total)
@@ -44,8 +46,32 @@
 - `data-testid` attributes added to 10+ component files (see commits since b294a51a)
 - 97 total `data-testid` values needed — most added, some still mismatched with UI
 
-### Next Steps for Next Session
-1. Fix remaining E2E selectors — run login workflow test to see current failures:
+### Next Steps for Next Session (Phase 2: Component Extractions)
+
+**Phase 2 targets** (from refactoring plan):
+1. **`StockAdjustmentPanel`** from page.tsx
+2. **`NewItemDialog`** from page.tsx
+3. **`ScannerSection`** from page.tsx
+4. **`CameraView`** from Scanner.tsx
+5. **`InventoryTable`** from inventory/page.tsx
+6. **`FilterBar`** from inventory/page.tsx
+7. **`LogsTable`** from logs/page.tsx
+
+**How to proceed:**
+1. Run baseline: `npm run test -- --run && python -m pytest backend/tests/ -q`
+2. Extract components **bottom-up** (leaf nodes first)
+3. After each extraction: run tests, commit
+4. After Phase 2: run `npm run build` and smoke-test UI
+
+**Test Status:**
+- Backend: 41/41 passing
+- Frontend: 291/291 passing
+- E2E: Not yet validated (1/81 tests passing — selectors need fixing)
+
+---
+
+### Previous E2E Notes
+- Fix remaining E2E selectors — run login workflow test to see current failures:
    ```bash
    cd /data/programare_AI/tfm_ainventory
    source backend/venv/bin/activate && python -m uvicorn backend.main:app --port 8916 &