diff --git a/dev_docs/SESSION_STATE.md b/dev_docs/SESSION_STATE.md
index fbbca50b..9bfe46cb 100644
--- a/dev_docs/SESSION_STATE.md
+++ b/dev_docs/SESSION_STATE.md
@@ -1,17 +1,18 @@
-# AI Session State
+# AI Session State - HANDOVER
 
-**Status**: Active - Implementation of AI Coordination and Advanced Operations.
+**Status**: Phase 3 Completed. Ready for Phase 4 (Frontend/PWA).
 **Current AI Agent**: Gemini (Antigravity)
-**Context**: 
-- Backend is initialized with FastAPI and SQLite.
-- Core Item and Operation routers are registered.
-- `AI_RULES.md` is initialized.
+**Context**:
+- **Backend**: Fully functional SQLite + FastAPI foundation. Supporting single/bulk check-in/out and trash operations.
+- **Audit Logging**: Mandatory and immutable across all mutation endpoints.
+- **Coordination**: Multi-AI Handover protocol established. `SESSION_STATE.md` (this file) and `SESSION_HISTORY.md` (archive) are ready.
 
-**Specific Implementation Logic**:
-- Audit logging is central to all operations.
-- Using `html5-qrcode` for the PWA later.
-- Avoid native mobile apps, use PWA with service workers.
+**Technical Notes for next session**:
+- Every mutation in `routers/operations.py` and `routers/items.py` triggers an `AuditLog` entry.
+- `bulk-check-out` parses a list and performs individual item logging.
+- PWA is the next big step. Needs to support offline barcode scanning using `html5-qrcode` and eventual `IndexedDB` sync.
 
-**Handovers**:
-- Starting work on `trash` and `bulk-check-out` endpoints.
-- Coordination files being established.
+**Next Steps**:
+1. Initialize the Frontend project (using React/Next.js/Tailwind).
+2. Establish the PWA manifest and Service Worker for offline support.
+3. Build the Dashboard UI.