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Panzer Dragoon Mini was developed by Rit's, a Japanese game developer established in 1991. If the dragon's health is depleted, the game is over but the player can keep playing via unlimited continues and resume their progress via a password feature. Each dragon has a health bar, which is reduced whenever the dragon takes damage from an enemy. The boss' projectiles can be shot down but cannot be locked on. During boss encounters, the camera occasionally switches to the side of the dragon. The reticle can be controlled with the D-pad, and the player can attack enemies by either shooting or locking on them to fire shots simultaneously.
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Enemies can appear from all directions and are tracked by a radar display in the upper right corner of the screen.
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Gameplay is scaled-down compared to the Sega Saturn entries, featuring no story and three difficulty levels the player controls an aiming reticle for one of three selectable super deformed flying dragons without a rider as they move through the level. Panzer Dragoon Mini is a single-player rail shooter similar to Space Harrier (1985) which spans five levels, with each after the first including a boss encounter.
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