Warm water in microwave for approximately 30 seconds. Add sugar and yeast to water. Mix thoroughly and set aside for 5 minutes.
In a medium-sized mixing bowl, combine egg, milk, vegetable oil and sugar with a whisk.
Slowly mix in 1 1/2 cup flour to the egg mixture a little at a time. Then, add yeast mixture and mix well. Once combined, slowly mix in the remaining 1 1/2 cup flour to the mixture.
Knead dough for approximately 10 minutes or until it becomes smooth and stretchy. If the dough is too sticky to easily remove from the bowl, slowly add up to 3/4 cup flour. Spray your hands with cooking spray to prevent the dough from sticking to your hands.
Remove the dough from the bowl and place it into another bowl greased with cooking spray. Cover the bowl with a damp cloth and allow the allow to rise in a warm area for about 1-2 hours.
Once the dough has risen, lightly punch the dough and start it into 1-2 inch balls. Place the balls on a greased baking sheet, cover again with a damp cloth, and allow to rise for about 30 more minutes.
Fry your dough balls in oil over medium-high heat until golden brown.
Remove malasadas from oil and drain over a paper towel. While the malasadas are still hot, coat them in a combination of sugar and cinnamon.