Mystic Ark/The Ark of Fire

Hydro Area City
The Synthesis Machine allows to turn useless items into new items. At this point of the game, you should have four useless items that can be used in the machine. Later, you will find more plot items that can be used to obtain relevant items. Add either a liquid or a magic item to turn these into another item.
 * Junk & deck brush — Deck Brush weapon (for the Priestess)
 * Bottle of candies — Full Metal Jacket (for the Tetsujin)
 * Scrap of paper — Mirrored shield (for the Hero, Ninja and Ogre)

Note that, in order to get the deck brush weapon, you must insert first the junk, then the deck brush item, and only afterwards the liquid/magic item. For the other items, any order will do.

Any other combination of two items (Solid&Liquid, Liquid&Magic, Magic&Solid) will turn into one of three items that can be purchased in shops.

Dungeon: Hydro Cell
NOTE: When you collect the Ark, all monsters disappear from the surface (including Bottomless Pit and Snowgate Pass). Make sure you collected the all the figurines you need.

Aftermath
Go back to Ratwood and collect a strong sword from the weaponsmith.

All monsters disappear from the surface, you can only collect figurines in the underground and in the Hydro Area.

Monsters & arena
The strongest monsters right now are all at Lv. 24: Medusa, Tetsujin M003 and Tetsuujin M004. Avoid pitting any of your monsters against the other two, the odds of winning are very slim, and you could lose your figurine.