Thanks for playing! You have to level up by fighting. When you level, your health and mana should be refilled. Once you are level 3, most fights should be significantly easier. The fights in the lab are more difficult than the ones outside. The level is capped at 5 so that you can't overpower yourself by leveling outside over and over. We wanted to add more skills and items/equipment, but with the lack of time we weren't able to add everything we wanted.