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Preheat your oven to 350 degrees.
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Lightly grease a baking sheet with non-stick spray.
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Cut onion cross-wise into quarter-inch thick slices and separate the rings.
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Season milk, panko, and flour with the salt, sugar, cayenne and paprika.
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Dip onion slices into the milk, Make sure the whole slice is covered in milk --you can soak it in the milk overnight if you'd like.
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Dip the onion slice into the flour and then back into the milk (this will help the panko stick).
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Now dip the ring into the panko.
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Place onto the baking sheet about 1/4 inch apart to make sure the rings don't steam each other (makes rings crispier).
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Bake for about 20-25 minutes or until golden brown.