What happens next?

I had this idea for a little writing exercise. Below is the beginning of a story I've written, but it isn't finished. Your job it to write what happens next. It can be any part in the story, in the middle, the end, anywhere. There doesn't have to be a lot of detail. I want to see your imaginations. Let me set the scene...

The fishing docks were quiet and unoccupied. Boats and ships bobbed as the waves jumped and dived. Moonlight shone against the dark waves. The moon was full, the stars were black, and the twilight was awaking.
James walked across the beach following the dark line the waves left on the sand. As he did, he thought about the countless evenings he had spent walking the beach with his little sister, who was now seventeen. He felt his heart drop at the thought of his sister. A few weeks ago, she had gone for a walk along the beach one evening and never came back. The villagers claimed it to be the work of the dragon that inhabited the lake.
He was aroused from his thoughts by the waves being broken. He turned in surprise to the lake's surface in time to see the head of a water dragon break through the black water. It looked around before its sea green eyes rested on James.
"It's a bit late for a walk isn't it?" the dragon asked in its melodious voice.
At first, James was taken back a bit. The he could find words.
"You ate my sister!" he screamed.
"Did I? I find it hard to remember my meals."
"She went missing two weeks ago. You ate her."
"On the contrary lad, my last meal was at the beginning of the month. I haven't eaten a thing since."
"Then what happened to my sister?!" James could not be angrier than he was now.
At first, the dragon didn't speak. He pondered to himself, leaving an enraged James to fume on the beach. Then the dragon's eyes widened.
"Hold on a moment," it said. "So, it was your sister that the warlock's men kidnapped on the beach two weeks ago?"
"You know what happened to her?"
"I suppose. She was walking along the beach and the Dark Warlock's men appeared and kidnapped her."
"Where is this Dark Warlock? I'll find him and get my sister back."
"As you wish. I hope you like adventures. If you wish to find the Dark Warlock's castle, go to the edge of the forest and find Darius the phoenix. He can show you the way. Tell him Nero sent you." The water dragon dived back into the water, leaving James alone on the beach.
James was in shock. The forest? Nero really wanted him to make the journey through to the Dark Warlock's castle? Him, of all people. Everyone knew the forest was not a place to explore; it was full of all forms of creatures, goblins, ogres, centuars, other dragons, and a witch coven or two. No, he thought, it wasn't worth it. As he was about to continue down the beach, he thought of his sister trapped in a warlock's castle.
"It is worth it," he decided.
Summing up his courage, he turned and sprinted toward the forest. He turned the name of Darius over and over in his mind, branding it into his memory. But could he really trust the work of a dragon? Either way, huffing and puffing, James ran into the haunting bowels of the forest, not knowing if he would come out again.

So? What do you think Darius is like? Who do they encounter in the forest? How dark is the Dark Warlock? What is James's plan to save his sister? Does he save his sister? What happens next?