Combine yeast, warm water, and sugar and let rest 5 minutes. Using electric beaters, mix in skim milk, 2 cups flour, and salt. Add in enough of the extra flour to form a soft dough.
Knead dough until elastic, about 5 minutes. Lay dough in a greased bowl and let rise, covered in a warm place 45 minutes. Dough should be doubled in size. Punch down dough.
Roll dough on floured surface into a 16 x 12-inch rectangle. Slice dough lengthwise into 12 strips, 1 inch wide. Roll one strip with palms of hands until rounded and 18 to 20 inches in length. Form loop, holding ends of strips and twisting strip 2 times. Bring ends of strip down and secure at opposite sides of loops to make a pretzel shape. Continue on with the rest of the dough. Lay pretzels on a floured surface and let rise covered for 3 minutes.
Boil 2 quarts of water and add in baking soda. Place pretzels, a few at a time in the boiling water and cook 1 minute. Using a slotted spoon take pretzels out of water, letting then strain. Move to a cooking spray coated, aluminum foil covered baking sheet.
Whisk together egg and cold water; coat pretzels with egg wash. Scatter toppings over pretzels. Bake at 400 degrees F 18 to 20 minutes or until golden brown. Let cool.