After SpongeBob encounters Ginger and the other lost kids, Ginger tries to give the teddy fish some candy. SpongeBob tries to take it, but Ginger says she found it first. SpongeBob then tricks her and grabs the teddy fish, causing her and the other lost kids to chase him.
When SpongeBob and the lost kids get out of the lost and found, he hands the teddy fish to the child, who doesn't want it anymore, throwing it away. Ginger catches it and then hugs it. The child then says he would rather have the Tylosaurus.
Lost and Found
It reappears as a collectable item in the fifth level.