Answer: The fungus indicates over watering or lack of good air circulation. Space the plants further apart and all the top of the soil to dry out before watering again. Try putting them under a source of artificial light for 14-16 hours each day, keeping the lights about 4" -6" above the tops of the plants. An inexpensive way to provide light to seedlings is by using fluorescent shoplights. These are hooded fixtures with chains attached to the tops, making them easy to suspend over a tray or flat of plants. Use 40Watt bulbs; one cool-white and one warm-white in each fixture. Then hang them over your plants, adjusting the height of the fixture so the bulbs remain 4"-6" above the foliage.
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