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I just updated it with my first attempt at occlusion. It's still pretty rough, but gets the idea across. No actors, just setting background priority. Required reducing the color palette in order to make the diagonals work. The diagonals are still buggy, but at the same time work better than they have any right to.
I use a global variable to track the health. It gets set to 10 on scene init, and then gets decremented whenever the player gets hit. The indicator is a sprite consisting of 10 frames, numerals 0-9 except the 0 is replaced by 10 to save space. When the health changes, the sprite's frame is set to the value of the health variable. If the health is zero, then the game over is triggered.