He's actually got four arms, only 3 of which (2 at rest) I was able to fit into the picture. I decided that adding the fourth arm would have made the picture more visually-as opposed to descriptively-confusing.
They replace his wings, and the two you can see on the first pic are actually meant to both be on the side closest. These dragons are based somewhat on real mythology, although not specific dragons as such, since these aren't meant to be unique critters.
Just for kicks, here's an attack sprite with 4 arms intact. I guess it doesn't look too bad...