That is clearly "damping off".  It is a fungus that attacks the stem of the plant right at the surface.  Usually from being very wet and no air movement around the plant. Moist air harbors the pathogen. There's nothing we can do to save your tree as damping off is deadly for small tree seedlings.

But don't worry, we'll send you replacements to try again. Just report your issue to info@forestnation.com with photos and the tree species you were growing.