I was wondering if it was possible to create your own designs with the free version or if its limited to the actual version.
You can draw your own sprites using various programs such as Photoshop, MS paint, Gimp, Inkscape, Paint.NET and so on
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Yes you can create your own sprites with the free version. You can verify this very quickly by downloading and trying it. However the facilities are fairly basic (but still useful). I use Gimp for most tasks as it's free and powerful, and I've never gotten into Photoshop much.
Yes you can Scirra has done wonderful job and not like some tool I have used free one. Hats of to these boys
Are you asking about the biult in sprite editor?
Yes, you can draw sprites with it in free version too.
Why don't you use Gimp it's free and easy too