Toast panko bread crumbs in a pan (without oil) until golden brown, about 4 to 5 minutes. Remove and set aside.
Combine all-purpose flour, salt, and pepper in a shallow bowl. Mix well and set aside.
In another bowl, beat egg with 2 tablespoons of water.
Preheat oven to 375°F (190°C).
Cut off the tops and tails of yellow squashes (or zucchini). Cut each squash into quarters length-wise. Then cut each strip into quarters about 2 to 2½ inches in length.
Dredge a piece of squash in flour mixture. Then dip in egg mixture and finally coat with toasted panko bread crumbs. Place on a parchment lined baking sheet. Repeat until all the pieces of squash are coated.
Transfer baking tray to the oven and bake coated squash for 15 to 20 minutes or until tender.
Remove and sprinkle baked fritters with some salt.
Serve immediately with ketchup.