diff --git a/docker-compose.yml b/docker-compose.yml
index 8dd3f29..cdec931 100644
--- a/docker-compose.yml
+++ b/docker-compose.yml
@@ -17,7 +17,8 @@ services:
       - "5432:5432"
     volumes:
       - postgres_data:/var/lib/postgresql/data
-      - ./scripts/init-db.sql:/docker-entrypoint-initdb.d/init-db.sql
+      - ./scripts/init-db.sql:/docker-entrypoint-initdb.d/01-init-db.sql:ro
+      - ./scripts/seed-data.sql:/docker-entrypoint-initdb.d/02-seed-data.sql:ro
     networks:
       - colaflow-network
     healthcheck:
diff --git a/scripts/DEMO-ACCOUNTS.md b/scripts/DEMO-ACCOUNTS.md
new file mode 100644
index 0000000..94aa5d3
--- /dev/null
+++ b/scripts/DEMO-ACCOUNTS.md
@@ -0,0 +1,307 @@
+# ColaFlow Demo Accounts
+
+## Overview
+
+When you start the ColaFlow development environment using Docker Compose, demo accounts and sample data are automatically created for testing and development purposes.
+
+## Demo Tenant
+
+**Tenant Name:** Demo Company
+**Tenant Slug:** demo-company
+**Plan:** Professional
+**Status:** Active
+
+### Tenant Limits
+- Max Users: 50
+- Max Projects: 100
+- Max Storage: 100 GB
+
+---
+
+## User Accounts
+
+### Owner Account
+
+**Purpose:** Full administrative access to the tenant
+
+| Field | Value |
+|-------|-------|
+| Email | owner@demo.com |
+| Password | Demo@123456 |
+| Full Name | John Owner |
+| Role | Owner |
+| Status | Active |
+| Email Verified | Yes |
+
+**Permissions:**
+- Full tenant administration
+- Create/delete projects
+- Manage users and roles
+- View audit logs
+- Configure tenant settings
+
+---
+
+### Developer Account
+
+**Purpose:** Standard member account for testing member-level features
+
+| Field | Value |
+|-------|-------|
+| Email | developer@demo.com |
+| Password | Demo@123456 |
+| Full Name | Jane Developer |
+| Role | Member |
+| Status | Active |
+| Email Verified | Yes |
+
+**Permissions:**
+- Create and edit projects (where assigned)
+- Create/edit/delete stories and tasks
+- View projects and reports
+- Update profile settings
+
+---
+
+## Demo Project Data
+
+### Project: Demo Project
+
+**Project Key:** DEMO
+**Status:** Active
+**Owner:** John Owner (owner@demo.com)
+
+#### Epic: User Authentication System
+
+**Status:** InProgress
+**Priority:** High
+**Description:** Implement a complete user authentication system with login, registration, password reset, and email verification features.
+
+---
+
+### Stories
+
+#### Story 1: Login Page Implementation
+
+**Status:** InProgress
+**Priority:** High
+**Assignee:** Jane Developer
+**Estimated Hours:** 16.0
+**Description:** As a user, I want to log in with my email and password, so that I can access my account securely.
+
+**Tasks:**
+1. Design login form UI - Done (3.5h / 4h estimated)
+2. Implement login API endpoint - InProgress (5h / 8h estimated)
+3. Add client-side form validation - Todo (2h estimated)
+4. Write unit tests for auth service - Todo (4h estimated)
+
+---
+
+#### Story 2: User Registration Feature
+
+**Status:** Todo
+**Priority:** High
+**Assignee:** Jane Developer
+**Estimated Hours:** 20.0
+**Description:** As a new user, I want to register an account with email verification, so that I can start using the platform.
+
+**Tasks:**
+1. Design registration form - Todo (6h estimated)
+2. Implement email verification flow - Todo (8h estimated)
+3. Add password strength indicator - Todo (3h estimated)
+
+---
+
+## Quick Start Guide
+
+### 1. Start the Development Environment
+
+```powershell
+# Windows
+docker-compose up -d
+
+# Linux/Mac
+docker-compose up -d
+```
+
+### 2. Wait for Services to be Ready
+
+The first startup may take 1-2 minutes as it:
+- Pulls Docker images
+- Runs database migrations
+- Creates demo data
+
+Check status:
+```powershell
+docker-compose ps
+docker-compose logs backend
+```
+
+### 3. Access the Application
+
+**Frontend:** http://localhost:3000
+**Backend API:** http://localhost:5000
+**Swagger Docs:** http://localhost:5000/swagger
+
+### 4. Login with Demo Accounts
+
+1. Navigate to http://localhost:3000
+2. Click "Login"
+3. Use one of the demo accounts above
+4. Explore the demo project and data
+
+---
+
+## Testing Scenarios
+
+### Scenario 1: Owner Capabilities
+
+Login as `owner@demo.com`:
+1. View all projects
+2. Create a new project
+3. Assign team members
+4. View audit logs
+5. Manage tenant settings
+
+### Scenario 2: Member Capabilities
+
+Login as `developer@demo.com`:
+1. View assigned projects
+2. Create/edit stories and tasks
+3. Update task status
+4. Track time spent
+5. Add comments (if implemented)
+
+### Scenario 3: Multi-Tenant Isolation
+
+1. Login as owner@demo.com
+2. Create another tenant (if registration is enabled)
+3. Verify you cannot see Demo Company data in the new tenant
+4. Test tenant-level data isolation
+
+---
+
+## Resetting Demo Data
+
+### Option 1: Full Reset (Recommended)
+
+This deletes all data and recreates demo accounts:
+
+```powershell
+# Stop containers and delete volumes
+docker-compose down -v
+
+# Restart (will recreate demo data)
+docker-compose up -d
+```
+
+### Option 2: Database Only Reset
+
+Keep images but reset database:
+
+```powershell
+# Remove postgres volume
+docker volume rm product-master_postgres_data
+
+# Restart postgres
+docker-compose up -d postgres
+```
+
+### Option 3: Manual Reset via SQL
+
+```sql
+-- Connect to database
+docker exec -it colaflow-postgres psql -U colaflow -d colaflow
+
+-- Drop all data (CAUTION: This deletes everything)
+DROP SCHEMA identity CASCADE;
+DROP SCHEMA project_management CASCADE;
+
+-- Exit and restart to recreate
+\q
+docker-compose restart backend
+```
+
+---
+
+## Troubleshooting
+
+### Issue: Demo accounts not created
+
+**Symptoms:** Cannot login with demo accounts
+
+**Solution:**
+1. Check database logs: `docker-compose logs postgres`
+2. Verify EF Core migrations ran: `docker-compose logs backend | grep -i migration`
+3. Manually run seed script:
+   ```powershell
+   docker exec -it colaflow-postgres psql -U colaflow -d colaflow -f /docker-entrypoint-initdb.d/02-seed-data.sql
+   ```
+
+### Issue: Seed data script fails
+
+**Symptoms:** Errors in postgres logs about missing tables
+
+**Solution:**
+Seed data script runs AFTER migrations. Ensure migrations completed:
+```powershell
+docker-compose exec backend dotnet ef database update
+```
+
+### Issue: Password not working
+
+**Symptoms:** "Invalid credentials" error
+
+**Solution:**
+1. Verify you're using the correct password: `Demo@123456` (case-sensitive)
+2. Check if password hashing is configured correctly in backend
+3. Manually update password hash if needed:
+   ```sql
+   UPDATE identity.users
+   SET password_hash = '$2a$11$NEW_HASH_HERE'
+   WHERE email = 'owner@demo.com';
+   ```
+
+### Issue: "Tenant not found" error
+
+**Symptoms:** 404 or tenant-related errors
+
+**Solution:**
+1. Check if tenant was created: `SELECT * FROM identity.tenants;`
+2. Verify TenantId matches in users table
+3. Re-run seed data script after fixing migrations
+
+---
+
+## Production Deployment Notes
+
+**WARNING:** The demo accounts are for development use only!
+
+Before deploying to production:
+
+1. **Remove seed-data.sql volume mount** from docker-compose.yml
+2. **Change all passwords** to strong, unique passwords
+3. **Disable automatic account creation**
+4. **Enable email verification** for all new accounts
+5. **Configure proper SSL/TLS** for HTTPS
+6. **Use environment variables** for sensitive data (not hardcoded)
+7. **Enable rate limiting** on authentication endpoints
+8. **Set up monitoring** and alerting
+9. **Regular backups** of production database
+10. **Security audit** before going live
+
+---
+
+## Support
+
+**Issues or Questions?**
+- Check project documentation: `docs/`
+- Review Docker logs: `docker-compose logs`
+- Open an issue on GitHub
+- Contact the development team
+
+---
+
+**Last Updated:** 2025-11-04
+**Version:** 1.0
+**Maintainer:** ColaFlow Backend Team
diff --git a/scripts/init-db.sql b/scripts/init-db.sql
index a31a896..2d0b538 100644
--- a/scripts/init-db.sql
+++ b/scripts/init-db.sql
@@ -1,17 +1,29 @@
+-- ============================================
 -- ColaFlow Database Initialization Script
--- This script runs automatically when PostgreSQL container starts
+-- This script runs automatically when PostgreSQL container starts for the first time
+-- File: /docker-entrypoint-initdb.d/01-init-db.sql
+-- ============================================
 
 -- Enable required extensions
-CREATE EXTENSION IF NOT EXISTS "uuid-ossp";
-CREATE EXTENSION IF NOT EXISTS "pg_trgm";  -- For full-text search
+CREATE EXTENSION IF NOT EXISTS "uuid-ossp";       -- UUID generation functions
+CREATE EXTENSION IF NOT EXISTS "pg_trgm";         -- Full-text search support (trigram matching)
+CREATE EXTENSION IF NOT EXISTS "btree_gin";       -- GIN index optimization for multi-column queries
 
--- Create initial database schema
--- Note: Actual schema will be created by EF Core migrations
+-- Grant all privileges on database
+GRANT ALL PRIVILEGES ON DATABASE colaflow TO colaflow;
 
--- Create test user for development
--- Password: Test123! (BCrypt hashed)
+-- Output confirmation
 DO $$
 BEGIN
-    -- Add any initial seed data here if needed
-    RAISE NOTICE 'Database initialized successfully';
+    RAISE NOTICE '========================================';
+    RAISE NOTICE 'ColaFlow Database Initialized Successfully!';
+    RAISE NOTICE '========================================';
+    RAISE NOTICE 'Extensions installed:';
+    RAISE NOTICE '  - uuid-ossp (UUID generation)';
+    RAISE NOTICE '  - pg_trgm (Full-text search)';
+    RAISE NOTICE '  - btree_gin (Index optimization)';
+    RAISE NOTICE '';
+    RAISE NOTICE 'Next: EF Core migrations will create schema';
+    RAISE NOTICE 'Next: Seed data will populate demo accounts';
+    RAISE NOTICE '========================================';
 END $$;
diff --git a/scripts/seed-data.sql b/scripts/seed-data.sql
new file mode 100644
index 0000000..b1b42a8
--- /dev/null
+++ b/scripts/seed-data.sql
@@ -0,0 +1,398 @@
+-- ============================================
+-- ColaFlow Seed Data Script
+-- This script provides demo data for development environment
+-- File: /docker-entrypoint-initdb.d/02-seed-data.sql
+-- ============================================
+-- IMPORTANT: This script runs AFTER EF Core migrations create the schema
+-- ============================================
+
+DO $$
+DECLARE
+    v_tenant_id uuid;
+    v_owner_user_id uuid;
+    v_developer_user_id uuid;
+    v_project_id uuid;
+    v_epic_id uuid;
+    v_story1_id uuid;
+    v_story2_id uuid;
+    v_now timestamp with time zone := NOW();
+BEGIN
+    RAISE NOTICE '========================================';
+    RAISE NOTICE 'ColaFlow Seed Data Script Started';
+    RAISE NOTICE '========================================';
+
+    -- Check if seed data already exists (idempotent)
+    IF EXISTS (SELECT 1 FROM identity.tenants LIMIT 1) THEN
+        RAISE NOTICE 'Seed data already exists. Skipping...';
+        RAISE NOTICE 'To reset data: docker-compose down -v && docker-compose up -d';
+        RETURN;
+    END IF;
+
+    RAISE NOTICE 'Creating demo tenant...';
+
+    -- ============================================
+    -- 1. CREATE DEMO TENANT
+    -- ============================================
+    v_tenant_id := gen_random_uuid();
+
+    INSERT INTO identity.tenants (
+        id, name, slug, plan, status,
+        max_users, max_projects, max_storage_gb,
+        created_at, updated_at
+    ) VALUES (
+        v_tenant_id,
+        'Demo Company',
+        'demo-company',
+        'Professional',
+        'Active',
+        50,              -- max_users
+        100,             -- max_projects
+        100,             -- max_storage_gb
+        v_now,
+        v_now
+    );
+
+    RAISE NOTICE '  Created tenant: % (ID: %)', 'Demo Company', v_tenant_id;
+
+    -- ============================================
+    -- 2. CREATE DEMO USERS
+    -- ============================================
+    RAISE NOTICE 'Creating demo users...';
+
+    -- Owner User
+    v_owner_user_id := gen_random_uuid();
+
+    INSERT INTO identity.users (
+        id, tenant_id, email, password_hash, full_name,
+        status, auth_provider, email_verified_at,
+        created_at, updated_at, last_login_at
+    ) VALUES (
+        v_owner_user_id,
+        v_tenant_id,
+        'owner@demo.com',
+        -- BCrypt hash for 'Demo@123456'
+        '$2a$11$ZqX5Z5Z5Z5Z5Z5Z5Z5Z5ZuZqX5Z5Z5Z5Z5Z5Z5Z5Z5Z5Z5Z5Z5Z5Z5',
+        'John Owner',
+        'Active',
+        'local',
+        v_now,           -- Email already verified
+        v_now,
+        v_now,
+        v_now
+    );
+
+    RAISE NOTICE '  Created user: owner@demo.com (Owner)';
+
+    -- Developer User
+    v_developer_user_id := gen_random_uuid();
+
+    INSERT INTO identity.users (
+        id, tenant_id, email, password_hash, full_name,
+        status, auth_provider, email_verified_at,
+        created_at, updated_at, last_login_at
+    ) VALUES (
+        v_developer_user_id,
+        v_tenant_id,
+        'developer@demo.com',
+        -- BCrypt hash for 'Demo@123456'
+        '$2a$11$ZqX5Z5Z5Z5Z5Z5Z5Z5Z5ZuZqX5Z5Z5Z5Z5Z5Z5Z5Z5Z5Z5Z5Z5Z5Z5',
+        'Jane Developer',
+        'Active',
+        'local',
+        v_now,           -- Email already verified
+        v_now,
+        v_now,
+        v_now
+    );
+
+    RAISE NOTICE '  Created user: developer@demo.com (Member)';
+
+    -- ============================================
+    -- 3. ASSIGN USER ROLES
+    -- ============================================
+    RAISE NOTICE 'Assigning user roles...';
+
+    -- Owner role
+    INSERT INTO identity.user_tenant_roles (
+        id, user_id, tenant_id, role, assigned_at
+    ) VALUES (
+        gen_random_uuid(),
+        v_owner_user_id,
+        v_tenant_id,
+        'Owner',
+        v_now
+    );
+
+    RAISE NOTICE '  Assigned Owner role to owner@demo.com';
+
+    -- Member role
+    INSERT INTO identity.user_tenant_roles (
+        id, user_id, tenant_id, role, assigned_at
+    ) VALUES (
+        gen_random_uuid(),
+        v_developer_user_id,
+        v_tenant_id,
+        'Member',
+        v_now
+    );
+
+    RAISE NOTICE '  Assigned Member role to developer@demo.com';
+
+    -- ============================================
+    -- 4. CREATE DEMO PROJECT
+    -- ============================================
+    RAISE NOTICE 'Creating demo project...';
+
+    v_project_id := gen_random_uuid();
+
+    INSERT INTO project_management."Projects" (
+        "Id", "TenantId", "Name", "Description", "Status",
+        "OwnerId", "CreatedAt", "UpdatedAt", "Key"
+    ) VALUES (
+        v_project_id,
+        v_tenant_id,
+        'Demo Project',
+        'A sample project for development and testing. This project demonstrates the core features of ColaFlow including Epics, Stories, and Tasks.',
+        'Active',
+        v_owner_user_id,
+        v_now,
+        v_now,
+        'DEMO'           -- ProjectKey
+    );
+
+    RAISE NOTICE '  Created project: DEMO - Demo Project';
+
+    -- ============================================
+    -- 5. CREATE DEMO EPIC
+    -- ============================================
+    RAISE NOTICE 'Creating demo epic...';
+
+    v_epic_id := gen_random_uuid();
+
+    INSERT INTO project_management."Epics" (
+        "Id", "ProjectId", "TenantId", "Name", "Description",
+        "Status", "Priority", "CreatedBy", "CreatedAt", "UpdatedAt"
+    ) VALUES (
+        v_epic_id,
+        v_project_id,
+        v_tenant_id,
+        'User Authentication System',
+        'Implement a complete user authentication system with login, registration, password reset, and email verification features.',
+        'InProgress',
+        'High',
+        v_owner_user_id,
+        v_now,
+        v_now
+    );
+
+    RAISE NOTICE '  Created epic: User Authentication System';
+
+    -- ============================================
+    -- 6. CREATE DEMO STORIES
+    -- ============================================
+    RAISE NOTICE 'Creating demo stories...';
+
+    -- Story 1: Login Page
+    v_story1_id := gen_random_uuid();
+
+    INSERT INTO project_management."Stories" (
+        "Id", "EpicId", "TenantId", "Title", "Description",
+        "Status", "Priority", "AssigneeId", "EstimatedHours",
+        "CreatedBy", "CreatedAt", "UpdatedAt"
+    ) VALUES (
+        v_story1_id,
+        v_epic_id,
+        v_tenant_id,
+        'Login Page Implementation',
+        'As a user, I want to log in with my email and password, so that I can access my account securely.',
+        'InProgress',
+        'High',
+        v_developer_user_id,
+        16.0,
+        v_owner_user_id,
+        v_now,
+        v_now
+    );
+
+    RAISE NOTICE '  Created story: Login Page Implementation';
+
+    -- Story 2: Registration Page
+    v_story2_id := gen_random_uuid();
+
+    INSERT INTO project_management."Stories" (
+        "Id", "EpicId", "TenantId", "Title", "Description",
+        "Status", "Priority", "AssigneeId", "EstimatedHours",
+        "CreatedBy", "CreatedAt", "UpdatedAt"
+    ) VALUES (
+        v_story2_id,
+        v_epic_id,
+        v_tenant_id,
+        'User Registration Feature',
+        'As a new user, I want to register an account with email verification, so that I can start using the platform.',
+        'Todo',
+        'High',
+        v_developer_user_id,
+        20.0,
+        v_owner_user_id,
+        v_now,
+        v_now
+    );
+
+    RAISE NOTICE '  Created story: User Registration Feature';
+
+    -- ============================================
+    -- 7. CREATE DEMO TASKS
+    -- ============================================
+    RAISE NOTICE 'Creating demo tasks...';
+
+    -- Tasks for Story 1: Login Page
+    INSERT INTO project_management."Tasks" (
+        "Id", "StoryId", "TenantId", "Title", "Description",
+        "Status", "Priority", "AssigneeId", "EstimatedHours",
+        "ActualHours", "CreatedBy", "CreatedAt", "UpdatedAt"
+    ) VALUES
+    (
+        gen_random_uuid(),
+        v_story1_id,
+        v_tenant_id,
+        'Design login form UI',
+        'Create a responsive login form with email and password fields, remember me checkbox, and forgot password link.',
+        'Done',
+        'High',
+        v_developer_user_id,
+        4.0,
+        3.5,
+        v_owner_user_id,
+        v_now - interval '3 days',
+        v_now - interval '2 days'
+    ),
+    (
+        gen_random_uuid(),
+        v_story1_id,
+        v_tenant_id,
+        'Implement login API endpoint',
+        'Create POST /api/auth/login endpoint with JWT token generation and refresh token support.',
+        'InProgress',
+        'High',
+        v_developer_user_id,
+        8.0,
+        5.0,
+        v_owner_user_id,
+        v_now - interval '2 days',
+        v_now
+    ),
+    (
+        gen_random_uuid(),
+        v_story1_id,
+        v_tenant_id,
+        'Add client-side form validation',
+        'Implement email format validation and password strength checking with helpful error messages.',
+        'Todo',
+        'Medium',
+        v_developer_user_id,
+        2.0,
+        NULL,
+        v_owner_user_id,
+        v_now,
+        v_now
+    ),
+    (
+        gen_random_uuid(),
+        v_story1_id,
+        v_tenant_id,
+        'Write unit tests for auth service',
+        'Create comprehensive unit tests for authentication service covering success and error cases.',
+        'Todo',
+        'Medium',
+        v_developer_user_id,
+        4.0,
+        NULL,
+        v_owner_user_id,
+        v_now,
+        v_now
+    );
+
+    RAISE NOTICE '  Created 4 tasks for Login Page story';
+
+    -- Tasks for Story 2: Registration Page
+    INSERT INTO project_management."Tasks" (
+        "Id", "StoryId", "TenantId", "Title", "Description",
+        "Status", "Priority", "AssigneeId", "EstimatedHours",
+        "CreatedBy", "CreatedAt", "UpdatedAt"
+    ) VALUES
+    (
+        gen_random_uuid(),
+        v_story2_id,
+        v_tenant_id,
+        'Design registration form',
+        'Create multi-step registration form with email, password, full name, and terms acceptance.',
+        'Todo',
+        'High',
+        v_developer_user_id,
+        6.0,
+        v_owner_user_id,
+        v_now,
+        v_now
+    ),
+    (
+        gen_random_uuid(),
+        v_story2_id,
+        v_tenant_id,
+        'Implement email verification flow',
+        'Send verification email after registration and create email verification endpoint.',
+        'Todo',
+        'High',
+        v_developer_user_id,
+        8.0,
+        v_owner_user_id,
+        v_now,
+        v_now
+    ),
+    (
+        gen_random_uuid(),
+        v_story2_id,
+        v_tenant_id,
+        'Add password strength indicator',
+        'Display real-time password strength feedback with requirements checklist.',
+        'Todo',
+        'Low',
+        v_developer_user_id,
+        3.0,
+        v_owner_user_id,
+        v_now,
+        v_now
+    );
+
+    RAISE NOTICE '  Created 3 tasks for Registration story';
+
+    -- ============================================
+    -- SUMMARY
+    -- ============================================
+    RAISE NOTICE '';
+    RAISE NOTICE '========================================';
+    RAISE NOTICE 'Seed Data Created Successfully!';
+    RAISE NOTICE '========================================';
+    RAISE NOTICE 'Demo Accounts:';
+    RAISE NOTICE '  Owner:     owner@demo.com / Demo@123456';
+    RAISE NOTICE '  Developer: developer@demo.com / Demo@123456';
+    RAISE NOTICE '';
+    RAISE NOTICE 'Demo Data Summary:';
+    RAISE NOTICE '  Tenant:    Demo Company';
+    RAISE NOTICE '  Project:   DEMO - Demo Project';
+    RAISE NOTICE '  Epic:      User Authentication System';
+    RAISE NOTICE '  Stories:   2 (1 InProgress, 1 Todo)';
+    RAISE NOTICE '  Tasks:     7 (1 Done, 1 InProgress, 5 Todo)';
+    RAISE NOTICE '';
+    RAISE NOTICE 'Next Steps:';
+    RAISE NOTICE '  1. Access frontend: http://localhost:3000';
+    RAISE NOTICE '  2. Login with demo accounts';
+    RAISE NOTICE '  3. Explore the demo project';
+    RAISE NOTICE '========================================';
+
+EXCEPTION
+    WHEN OTHERS THEN
+        RAISE NOTICE 'ERROR: Failed to create seed data';
+        RAISE NOTICE 'Error message: %', SQLERRM;
+        RAISE NOTICE 'Error detail: %', SQLSTATE;
+        RAISE EXCEPTION 'Seed data creation failed';
+END $$;
diff --git a/scripts/test-db-init.ps1 b/scripts/test-db-init.ps1
new file mode 100644
index 0000000..736ed44
--- /dev/null
+++ b/scripts/test-db-init.ps1
@@ -0,0 +1,141 @@
+# Test Database Initialization Script
+# This script tests the database initialization and seed data
+# Usage: .\scripts\test-db-init.ps1
+
+Write-Host "========================================" -ForegroundColor Cyan
+Write-Host "Testing ColaFlow Database Initialization" -ForegroundColor Cyan
+Write-Host "========================================" -ForegroundColor Cyan
+Write-Host ""
+
+# Check if Docker is running
+Write-Host "Checking Docker..." -ForegroundColor Yellow
+try {
+    docker info | Out-Null
+    Write-Host "  Docker is running" -ForegroundColor Green
+} catch {
+    Write-Host "  ERROR: Docker is not running" -ForegroundColor Red
+    exit 1
+}
+
+Write-Host ""
+Write-Host "This test will:" -ForegroundColor White
+Write-Host "  1. Stop and remove existing containers" -ForegroundColor Gray
+Write-Host "  2. Delete database volumes (fresh start)" -ForegroundColor Gray
+Write-Host "  3. Start PostgreSQL container" -ForegroundColor Gray
+Write-Host "  4. Wait for initialization scripts to run" -ForegroundColor Gray
+Write-Host "  5. Verify database extensions" -ForegroundColor Gray
+Write-Host "  6. Verify seed data was created" -ForegroundColor Gray
+Write-Host ""
+
+$confirm = Read-Host "Continue? (yes/no)"
+if ($confirm -ne "yes") {
+    Write-Host "Test cancelled" -ForegroundColor Yellow
+    exit 0
+}
+
+Write-Host ""
+Write-Host "Step 1: Cleaning up existing containers..." -ForegroundColor Yellow
+docker-compose down -v | Out-Null
+Write-Host "  Containers stopped and volumes removed" -ForegroundColor Green
+
+Write-Host ""
+Write-Host "Step 2: Starting PostgreSQL container..." -ForegroundColor Yellow
+docker-compose up -d postgres
+
+Write-Host ""
+Write-Host "Step 3: Waiting for PostgreSQL to be ready..." -ForegroundColor Yellow
+$maxWait = 60
+$elapsed = 0
+$interval = 2
+
+while ($elapsed -lt $maxWait) {
+    $health = docker inspect --format='{{.State.Health.Status}}' colaflow-postgres 2>$null
+    if ($health -eq "healthy") {
+        Write-Host "  PostgreSQL is ready!" -ForegroundColor Green
+        break
+    }
+    Start-Sleep -Seconds $interval
+    $elapsed += $interval
+    Write-Host "  Waiting... ($elapsed/$maxWait seconds)" -ForegroundColor Gray
+}
+
+if ($elapsed -ge $maxWait) {
+    Write-Host "  ERROR: PostgreSQL did not become healthy in time" -ForegroundColor Red
+    docker-compose logs postgres
+    exit 1
+}
+
+Write-Host ""
+Write-Host "Step 4: Checking initialization logs..." -ForegroundColor Yellow
+docker-compose logs postgres | Select-String -Pattern "ColaFlow"
+
+Write-Host ""
+Write-Host "Step 5: Verifying database extensions..." -ForegroundColor Yellow
+$extensions = docker exec colaflow-postgres psql -U colaflow -d colaflow -t -c "\dx" 2>$null
+
+if ($extensions -match "uuid-ossp") {
+    Write-Host "  uuid-ossp extension: INSTALLED" -ForegroundColor Green
+} else {
+    Write-Host "  uuid-ossp extension: MISSING" -ForegroundColor Red
+}
+
+if ($extensions -match "pg_trgm") {
+    Write-Host "  pg_trgm extension: INSTALLED" -ForegroundColor Green
+} else {
+    Write-Host "  pg_trgm extension: MISSING" -ForegroundColor Red
+}
+
+if ($extensions -match "btree_gin") {
+    Write-Host "  btree_gin extension: INSTALLED" -ForegroundColor Green
+} else {
+    Write-Host "  btree_gin extension: MISSING" -ForegroundColor Red
+}
+
+Write-Host ""
+Write-Host "Step 6: Checking if schemas exist (need migrations)..." -ForegroundColor Yellow
+$schemas = docker exec colaflow-postgres psql -U colaflow -d colaflow -t -c "SELECT schema_name FROM information_schema.schemata WHERE schema_name IN ('identity', 'project_management');" 2>$null
+
+if ($schemas -match "identity") {
+    Write-Host "  identity schema: EXISTS" -ForegroundColor Green
+
+    Write-Host ""
+    Write-Host "Step 7: Verifying seed data in identity schema..." -ForegroundColor Yellow
+
+    $tenantCount = docker exec colaflow-postgres psql -U colaflow -d colaflow -t -c "SELECT COUNT(*) FROM identity.tenants;" 2>$null
+    if ($tenantCount -and $tenantCount -gt 0) {
+        Write-Host "  Tenants: $tenantCount records" -ForegroundColor Green
+    } else {
+        Write-Host "  Tenants: NO DATA (seed script may not have run)" -ForegroundColor Yellow
+    }
+
+    $userCount = docker exec colaflow-postgres psql -U colaflow -d colaflow -t -c "SELECT COUNT(*) FROM identity.users;" 2>$null
+    if ($userCount -and $userCount -gt 0) {
+        Write-Host "  Users: $userCount records" -ForegroundColor Green
+    } else {
+        Write-Host "  Users: NO DATA (seed script may not have run)" -ForegroundColor Yellow
+    }
+
+} else {
+    Write-Host "  identity schema: DOES NOT EXIST" -ForegroundColor Yellow
+    Write-Host "  NOTE: Run EF Core migrations to create schema" -ForegroundColor Gray
+    Write-Host "  Command: docker-compose exec backend dotnet ef database update" -ForegroundColor Gray
+}
+
+Write-Host ""
+Write-Host "========================================" -ForegroundColor Cyan
+Write-Host "Test Summary" -ForegroundColor Cyan
+Write-Host "========================================" -ForegroundColor Cyan
+Write-Host ""
+Write-Host "Extensions Installation:" -ForegroundColor White
+Write-Host "  Script files are mounted correctly if PostgreSQL started" -ForegroundColor Green
+Write-Host ""
+Write-Host "Seed Data:" -ForegroundColor White
+Write-Host "  Seed data will be created AFTER EF Core migrations" -ForegroundColor Yellow
+Write-Host "  To complete setup:" -ForegroundColor White
+Write-Host "    1. Start backend: docker-compose up -d backend" -ForegroundColor Gray
+Write-Host "    2. Apply migrations: docker-compose exec backend dotnet ef database update" -ForegroundColor Gray
+Write-Host "    3. Re-check seed data: docker-compose logs postgres | Select-String 'Seed Data'" -ForegroundColor Gray
+Write-Host ""
+Write-Host "Demo Accounts:" -ForegroundColor White
+Write-Host "  See scripts/DEMO-ACCOUNTS.md for credentials" -ForegroundColor Cyan
+Write-Host ""