This is such a cute pattern. You're at the part where you're starting to knit the body of the dragon. The leg sts are going onto 2 dpns (just slip them purlwise off the holder onto the dpns) so that you can start to knit them with some cast on sts between them, forming the lower body.
5 (leg 2)-----5 (leg 1)
4 (leg 2)-----4 (leg 1)
You'll have the sts lined up like this on the back and the front needles and you'll knit them in order: 4 sts from leg 1 (cast on 4sts where the 4 hyphens are, 4sts and then 5sts from leg 2 (cast on 4sts), and 5sts from leg 1. Once you get the stitches joined in the correct order, I'd slip some to a third needle for ease of knitting in the round.