The top image is Waddy, our player character, with his starting weapon, a laser gun. The bottom one is one of the submarine enemies that will be common in the second level. Obviously the second one still has to be edited a little--I'll be replacing the black guidelines with a more subtle dark grey--but I guess they'll do for now.
Both sprites were drawn and animated using layers in Photoshop using ImageReady. Then each sprite was converted into a sprite sheet. It's a little time-consuming, but the fiddliness of the whole process is weirdly therapeutic as well.