diff --git a/PROJECT_STATE.md b/PROJECT_STATE.md
index 0c12d04..54a5ee0 100644
--- a/PROJECT_STATE.md
+++ b/PROJECT_STATE.md
@@ -2,9 +2,9 @@
 
 > **Purpose**: Enable seamless continuation of development by any agent/LLM across sessions
 > 
-> **Last Updated**: 2025-01-31 (Responsive Layout Overhaul)
-> **Current Status**: ✅ MVP Complete — All Tasks 1-14 Done
-> **Phase**: MVP Release (Phase 1)
+> **Last Updated**: 2025-01-31 (SFTP Polish + File Transfer Planning)
+> **Current Status**: ✅ MVP Complete — Phase 1 Done, SFTP Responsive + Polish Done
+> **Phase**: Phase 2 (Security + UX Polish)
 
 ---
 
@@ -265,14 +265,14 @@
 - [x] Build system and integration tests
 
 ### Next Sprint
-- [ ] TUI implementation (Bubble Tea)
-- [ ] Export/import functionality
-- [ ] Key management commands
+- [ ] SFTP Performance: caching directory listings, batch directory reads
+- [ ] SFTP File Transfer: download (remote→local), upload (local→remote)
+- [ ] Phase 2 Priority 2: Security Enhancement (AES-256-GCM, key passphrase, known_hosts)
 
 ### Final Sprint
+- [ ] Phase 2 Priority 3: UX Polish (configuration profiles, theme customization, enhanced error messages)
 - [ ] Testing and integration
 - [ ] Documentation completion
-- [ ] Build system and release preparation
 
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