Oh wow.. that looks like some killer stretching... it needs to be wayyyyyy closer to your plants.. If your using CFL it can be almost touching them without burning.. I would say 2-3 inches away is probably a save bet though..
May be salvageable.. Move light closer.. and once you get some more foliar growth transplant into larger pot and bury like 90% of it and the stem should turn into root. Those 2 round looking leaves (cytoclyn) should be about an inch above the soil.... Also you shouldn't be water once a day.. Seedlings require a dry period to encourage root growth... I guess they try and "reach" the water once the soil is dry.. I would wait until soil is COMPLETELY dry to water again. I've heard of guys watering seedlings MAYBE twice a week.... Good luck!