Clash at Demonhead/Route 3

Description
Assuming you've entered from the left, shoot the small bouncing tree creatures as you make your way to the water on the right. When you jump in the water, you will encounter slowly flying enemies in both the air and the water. Shoot the ones at your level in the water, dodging the bullets if you care to.

When you hop out of the water, continue right, and you'll find a short man with a mustache. You will warn him that it's dangerous to be here, and he introduces himself as an ally named Michael. He mentions a grieving sprite on, which is a reference to Faysha who you likely already rescued if you're following the walkthrough. Remove the few enemies remaining in your way and proceed to the right exit.