diff --git a/src/components/admin/KnowledgeGraph.jsx b/src/components/admin/KnowledgeGraph.jsx
index 2142098..200b624 100644
--- a/src/components/admin/KnowledgeGraph.jsx
+++ b/src/components/admin/KnowledgeGraph.jsx
@@ -3,7 +3,8 @@ import * as d3 from 'd3';
 import { Trash2, Edit2, Save, X, RefreshCw, AlertCircle, Plus, Link as LinkIcon } from 'lucide-react';
 import * as db from '../../lib/db';
 import { anthropicApi } from '../../lib/api';
-import { getRepoFolder } from '../../lib/giteaService';
+import { analyzeHandbookDelta } from '../../lib/extractionPipeline';
+import { getRepoFolder, getFileContent } from '../../lib/giteaService';
 import Button from '../ui/Button';
 import SuggestionsQueue from './SuggestionsQueue';
 
@@ -21,6 +22,7 @@ const KnowledgeGraph = () => {
   const [isSyncing, setIsSyncing] = useState(false);
   const [syncResult, setSyncResult] = useState(null);
   const [syncError, setSyncError] = useState(null);
+  const [syncProgress, setSyncProgress] = useState(null);
 
   const [topics, setTopics] = useState([]);
   const [relations, setRelations] = useState([]);
@@ -221,10 +223,32 @@ const KnowledgeGraph = () => {
       });
 
       setSyncResult({ added, modified, unchanged });
+
+      const filesToProcess = [...added, ...modified];
+      if (filesToProcess.length > 0) {
+        setSyncProgress(`Processing 0 of ${filesToProcess.length} files...`);
+        let count = 0;
+        for (const file of filesToProcess) {
+          count++;
+          setSyncProgress(`Processing ${count} of ${filesToProcess.length}: ${file.name}...`);
+          try {
+            const rawContent = await getFileContent('respellion', 'employee-handbook', file.path);
+            await analyzeHandbookDelta(rawContent, file.path);
+            await db.updateHandbookSyncState(file.path, file.sha);
+          } catch (err) {
+            console.error('Failed to process file:', file.path, err);
+            // We continue processing other files even if one fails
+          }
+        }
+        setSyncProgress('Sync Complete!');
+        reloadKb();
+      }
+
     } catch (e) {
       setSyncError(e.message || 'Failed to check GitHub for updates.');
     } finally {
       setIsSyncing(false);
+      setTimeout(() => setSyncProgress(null), 5000); // Clear progress after 5s
     }
   };
 
@@ -358,9 +382,14 @@ Analyze this graph and return ONLY the optimized JSON object with this EXACT str
                 <p>Added files: {syncResult.added.length}</p>
                 <p>Modified files: {syncResult.modified.length}</p>
                 <p>Unchanged: {syncResult.unchanged.length}</p>
-                {(syncResult.added.length > 0 || syncResult.modified.length > 0) && (
-                  <p className="mt-2 italic text-teal">Ready for Phase 2 implementation.</p>
-                )}
+              </div>
+            )}
+            {syncProgress && (
+              <div className="mt-2 text-xs text-teal p-2 bg-teal/10 border border-teal/20 rounded">
+                <p className="font-medium flex items-center gap-2">
+                  {syncProgress !== 'Sync Complete!' && <RefreshCw size={12} className="animate-spin" />}
+                  {syncProgress}
+                </p>
               </div>
             )}
           </div>
diff --git a/src/lib/extractionPipeline.js b/src/lib/extractionPipeline.js
index bb16818..f2026c3 100644
--- a/src/lib/extractionPipeline.js
+++ b/src/lib/extractionPipeline.js
@@ -24,8 +24,48 @@ ALWAYS return a valid JSON object in the following format:
     }
   ]
 }
+}
 Return JSON only. No markdown blocks or other text.`;
 
+const HANDBOOK_SYSTEM_PROMPT = `You are analyzing an update to the Respellion Employee Handbook.
+Your task is to identify changes and extract structural knowledge.
+
+CRITICAL INSTRUCTION:
+You must explicitly identify and create relations between Roles, Processes, and Concepts.
+Every Process must have a Role attached (who does it).
+Every Concept must have a relation to a Process or Role.
+
+Return a JSON object:
+{
+  "topics": [
+    { "id": "...", "label": "...", "type": "role | process | concept", "description": "...", "metadata": { "source": "github_handbook" } }
+  ],
+  "relations": [
+    { "source": "role-id", "target": "process-id", "type": "executes | related_to | depends_on | part_of", "description": "Brief metadata about this specific relation" }
+  ]
+}
+Return JSON only. No markdown blocks or other text.`;
+
+export async function analyzeHandbookDelta(fileContent, filePath) {
+  try {
+    const responseText = await anthropicApi.generateContent(HANDBOOK_SYSTEM_PROMPT, `Analyze the following handbook file update (${filePath}):\n\n${fileContent}`);
+
+    let extractedData;
+    try {
+      const jsonMatch = responseText.match(/\{[\s\S]*\}/);
+      const jsonStr = jsonMatch ? jsonMatch[0] : responseText;
+      extractedData = JSON.parse(jsonStr);
+    } catch (e) {
+      console.error('[Pipeline] AI returned non-JSON response for handbook delta:', responseText?.substring(0, 500));
+      throw new Error(`AI response was not valid JSON. The model responded with: "${responseText?.substring(0, 120)}..."`);
+    }
+
+    await mergeKnowledgeGraph(extractedData);
+    return { success: true, data: extractedData };
+  } catch (error) {
+    throw error;
+  }
+}
 export async function processSourceText(textContent, sourceName) {
   // Deduplicate: skip if a source with the same name was already successfully processed
   const existing = await db.getSources();
@@ -71,7 +111,16 @@ async function mergeKnowledgeGraph(newData) {
 
   if (newData.topics && Array.isArray(newData.topics)) {
     for (const t of newData.topics) {
-      if (!topicsMap.has(t.id)) {
+      if (topicsMap.has(t.id)) {
+        // Upsert: merge new data into existing topic
+        const existing = topicsMap.get(t.id);
+        topicsMap.set(t.id, { 
+          ...existing, 
+          ...t, 
+          // Keep existing description if new one is empty, or combine them if needed. Here we prefer the new one.
+          description: t.description || existing.description 
+        });
+      } else {
         topicsMap.set(t.id, t);
       }
     }