PROQR THERAPEUTICS N.V. Index to Unaudited Condensed Consolidated Financial Statements PAGE Unaudited Condensed Consolidated Statement of Financial Position at

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PROQR THERAPEUTICS N.V.

Index to Unaudited Condensed Consolidated Financial Statements

Unaudited Condensed Consolidated Financial Statements

PROQR THERAPEUTICS N.V.

Unaudited Condensed Consolidated Statement of Financial Position

The notes are an integral part of these condensed consolidated financial statements.

Unaudited Condensed Consolidated Financial Statements

PROQR THERAPEUTICS N.V.

Unaudited Condensed Consolidated Statement of Profit or Loss and OCI

( in thousands, except share and per share data)

The notes are an integral part of these condensed consolidated financial statements.

Unaudited Condensed Consolidated Financial Statements

PROQR THERAPEUTICS N.V.

Unaudited Condensed Consolidated Statement of Changes in Equity

The notes are an integral part of these condensed consolidated financial statements

Unaudited Condensed Consolidated Financial Statements

PROQR THERAPEUTICS N.V.

Unaudited Condensed Consolidated Statement of Cash Flows

The notes are an integral part of these condensed consolidated financial statements.

Unaudited Condensed Consolidated Financial Statements

PROQR THERAPEUTICS N.V.

Notes to Unaudited Condensed Consolidated Financial Statements

1. General information

ProQR Therapeutics N.V., or "ProQR" or the "Company", is a development stage company domiciled in the Netherlands that primarily focuses on the development and commercialization of novel therapeutic medicines.

Since September 18, 2014, the Company's ordinary shares are listed on the NASDAQ Global Market under ticker symbol PRQR.

The Company was incorporated in the Netherlands, on February 21, 2012 and was reorganized from a private company with limited liability to a public company with limited liability on September 23, 2014. The Company has its statutory seat in Leiden, the Netherlands. The address of its headquarters and registered office is Zernikedreef 9, 2333 CK Leiden, the Netherlands.

ProQR Therapeutics N.V. is the ultimate parent company of the following entities:

ProQR Therapeutics N.V. is also statutory director of Stichting Bewaarneming Aandelen ProQR ("ESOP Foundation") and has full control over this entity. The Company holds a 4.9% minority shareholding in Yarrow Biotechnology, Inc.

As used in these condensed consolidated financial statements, unless the context indicates otherwise, all references to "ProQR" or the "Company" refer to ProQR Therapeutics N.V. including its subsidiaries and the ESOP Foundation.

2. Significant Accounting Policies

These condensed consolidated financial statements have been prepared in accordance with the recognition and measurement criteria of IFRS. Certain disclosures required by IAS 34 Interim Financial Statements have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the Company's annual financial statements for the year ended December 31, 2020. In the opinion of management, all events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the end of the last annual reporting period are disclosed in these condensed consolidated financial statements.

Unaudited Condensed Consolidated Financial Statements

Revenue is recognized in accordance with the recognition and measurement criteria of IFRS 15 Revenue from contracts with customers.

The Company's financial results have varied substantially, and are expected to continue to vary, from period to period. The Company believes that its ordinary activities are not linked to any particular seasonal factors.

The Company operates in one reportable segment, which comprises the discovery and development of innovative, RNA based therapeutics.

3. Adoption of new and revised International Financial Reporting Standards

The accounting policies adopted in the preparation of the condensed consolidated financial statements are consistent with those applied in the preparation of the Company's annual financial statements for the year ended December 31, 2020.

New Standards and Interpretations, which became effective as of January 1, 2021, did not have a material impact on our condensed consolidated financial statements.

4. Critical Accounting Estimates and Judgments

In the application of the Company's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The significant judgements made by management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those described in the Company's annual financial statements for the year ended December 31, 2020, except for the addition of significant judgements and key sources of estimation uncertainty in relation to revenue recognition for the Eli Lilly collaboration and license agreement.

Revenue recognition for the Eli Lilly collaboration and license agreement

a. Identification of the performance obligation

Note 11 describes the Company's collaboration and license agreement with Eli Lilly. Under this agreement, ProQR provides Eli Lilly with a license (with a right to sub-license) to exploit compounds resulting from the collaboration. A significant amount of judgement is required to determine whether the license is distinct from the other promises in the contract. The license was concluded not to be distinct from the other promises in the contract based on the following considerations:

Unaudited Condensed Consolidated Financial Statements

b. Determining the timing of satisfaction of performance obligations

For the Eli Lilly collaboration, the Company recognizes revenue over time, using an input method that estimates the satisfaction of the performance obligation as the percentage of labor hours incurred compared to the total estimated labor hours required to complete the promised services. As our estimate of the total labor hours required is dependent on the evolution of the research and development activities, it may be subject to change. If the progression and/or outcome of certain research and development activities would be different from the assumptions that were made during the preparation of these financial statements, this could lead to material adjustments to the total estimated labor hours, which might result in a reallocation of revenue between current and future periods.

c. Determining the transaction price

The Company applied judgement to determine whether the equity investment made by Eli Lilly in ProQR is part of the transaction price for the collaboration and license agreement. The Company concluded that the premium that Eli Lilly paid above the closing price on the day of entering into the equity investment agreement was paid because of the Company's existing obligations to deliver research and development services to Eli Lilly under the terms of the collaboration and license agreement. Therefore, the premium paid by Eli Lilly on the equity investment is considered to be part of the transaction price. The contract also includes variable consideration, but no variable consideration was included in the transaction price, as it is not highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Research and development expenditures

Development expenditures are currently not capitalized but are reflected in the income statement because the criteria for capitalization are not met. At each balance sheet date, the Company estimates the level of service performed by the vendors and the associated costs incurred for the services performed.

Although we do not expect the estimates to be materially different from amounts actually incurred, the understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in reporting amounts that are too high or too low in any particular period.

The terms of our convertible debt agreements are evaluated to determine whether the convertible debt instruments contain both liability and equity components, in which case the instrument is a compound financial instrument. Convertible debt agreements are also evaluated to determine whether they contain embedded derivatives, in which case the instrument is a hybrid financial instrument. Judgement is required to determine the classification of such financial instruments based on the terms and conditions of the convertible debt agreements, the currencies in which the debt instruments are denominated and the Company's functional currency.

Estimation methods are used to determine the fair values of the liability and equity components of compound financial instruments and to determine the fair value of embedded derivatives included in hybrid financial instruments. The determination of the effective interest used for the host contracts of hybrid financial instruments and the liability components of compound financial instruments is dependent on the outcome of such estimations. Evaluating the reasonableness of these estimations and the assumptions and inputs used in the valuation methods requires a significant amount of judgement and is therefore subject to an inherent risk of error.

Unaudited Condensed Consolidated Financial Statements

5. Cash and Cash Equivalents

At December 31, 2021, the Company's cash and cash equivalents were 187,524,000 as compared to 75,838,000 at December 31, 2020. The cash balances are held at banks with investment grade credit ratings. The cash at banks is at full disposal of the Company.

6. Property, plant and equipment

At December 31, 2021 and December 31, 2020, property plant and equipment consisted of buildings and leasehold improvements, laboratory equipment and other assets. Buildings and leasehold improvements include a right-of-use asset relating to the lease of our Leiden office and laboratory space, with a carrying amount of 15,568,000 at December 31, 2021 (December 31, 2020: 16,775,000).

7. Current liabilities

The following table summarizes details of deferred income at December 31, 2021 and December 31, 2020. The nature of the deferred income relating to Eli Lilly and Yarrow is described in Note 11.

At December 31, 2021, other current liabilities amount to 10,760 (December 31, 2020: 6,118). At December 31, 2021 and December 31, 2020, the other current liabilities consisted principally of accruals for services provided by vendors not yet billed, payroll related accruals and other miscellaneous liabilities.

On December 10, 2018 ProQR was awarded an Innovation credit for the sepofarsen program for LCA 10. Amounts will be drawn under this facility from 2018 through 2022. The total credit of 4.7 million will be used to conduct the Phase 2/3 clinical study for sepofarsen and to finance efforts to obtain regulatory and ethical market approval (NDA/MAA). The

Unaudited Condensed Consolidated Financial Statements

credit, including accrued interest of 10% per annum, is repayable depending on ProQR obtaining market approval for sepofarsen. An amount of 3.9 million had been received as at December 31, 2021. Accumulated interest amounted to 0.6 million as at December 31, 2021. The assets that are co-financed with the granted innovation credit are subject to a right of pledge for the benefit of RVO.

On July 14, 2020, the Company entered into a convertible debt financing agreement with Pontifax Medison Debt Financing. Under the agreement, up to $ 20 million in convertible debt financing is available to the Company in two tranches of $ 10 million each that will mature over a 54-month period and have an interest-only period of 24 months. One tranche of $ 10 million had been drawn down as of December 31, 2021.

A second close of the convertible debt financing agreement was completed on August 6, 2020 with Kreos Capital. Under the second agreement, up to 10 million in convertible debt financing is available to the Company in two tranches of 5 million each that will mature over a 54-month period and have an interest-only period of 24 months. One tranche of 5 million had been drawn down as of December 31, 2021.

In connection with the loan agreement, the Company issued to Pontifax and Kreos warrants to purchase up to an aggregate of 302,676 shares of its common stock at a fixed exercise price.

On December 29, 2021, the Company amended its convertible debt financing agreement with Pontifax and Kreos (the Lenders'). Under the amended agreement, the Company will have access to up to $ 90 million in convertible debt financing in three tranches of $ 30 million each that will mature over a 54-month period and have an interest-only period of 33 months. The three new tranches replace the two undrawn tranches under the original convertible debt financing agreements.

In connection with the loan agreement, the Company issued to the Lenders warrants to purchase up to an aggregate of 376,952 shares of its common stock at a fixed exercise price. In addition, at the time of drawing of each of the new second and third tranches, ProQR shall issue to Pontifax and Kreos additional warrants to purchase an aggregate number of ordinary shares with an aggregate exercise price of $750,000, with each such issuance of additional warrants being exercisable for a number of ordinary shares equal to $750,000 divided by 1.5 times the average closing price of ProQR's ordinary shares during the 7 trading days prior to the drawing of the relevant tranche.

The Lenders may elect to convert the outstanding loan into ProQR ordinary shares at any time prior to repayment at a fixed conversion price. ProQR also has the ability to convert the loan into its ordinary shares, at the same conversion price, if the Company's stock price reaches a pre-determined threshold.

Pontifax' conversion option and warrants are accounted for as embedded derivatives and are recognized separately from the host contract as financial liabilities at fair value through profit or loss. The host contract is recognized at amortized cost.

The Kreos loan is accounted for as a compound financial instrument. The liability component is recognized at amortized cost. The equity component is initially recognized at fair value as option premium on convertible loan and will not be subsequently remeasured. Kreos' warrants are accounted for as embedded derivatives and are recognized as financial liabilities at fair value through profit or loss.

Convertible loans were issued to Amylon Therapeutics B.V. and are interest-bearing at an average rate of 8% per annum. They are convertible into a variable number of ordinary shares within 36 months at the option of the holder or the

Unaudited Condensed Consolidated Financial Statements

Company in case financing criteria are met. Any unconverted loans become payable on demand after 24 - 36 months in equal quarterly terms.

9. Lease liabilities

At December 31, 2021 and December 31, 2020, lease liabilities primarily consisted of the Company's lease of office and laboratory facilities at Zernikedreef in Leiden, the Netherlands.

The lease agreement for our Leiden headquarters, where our main offices and laboratories are located, was put in place on July 1, 2020 and the current lease term is 11 years. The lease agreement may be further extended for subsequent 5-year terms. The carrying amount of the right-of-use asset is disclosed in note 6.

10. Shareholders' equity

The authorized share capital of the Company amounting to 13,600,000 consists of 170,000,000 ordinary shares and 170,000,000 preference shares with a par value of 0.04 per share. At December 31, 2021, 74,865,381 ordinary shares were issued. 71,290,805 ordinary shares were fully paid in cash and 3,574,576 ordinary shares were held by the Company as treasury shares (December 31, 2020: 3,926,743).

On March 31, 2020, the Company entered into a sales agreement, which permitted the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $ 75,000,000 of its ordinary shares that may be issued and sold in one or more at-the-market offerings with Citigroup Global Markets, Inc. and Cantor Fitzgerald & Co. In January 2021, the Company issued 585,398 ordinary shares under this sales agreement. The gross proceeds from this sale amounted to 2,767,000, with transaction costs amounting to 114,000, resulting in net proceeds of 2,653,000. In 2020, no shares were issued pursuant to this ATM facility.

In April 2021, the Company consummated an underwritten public offering of 15,923,077 ordinary shares at an issue price of $ 6.50 per share. The gross proceeds from this offering amounted to 88,115,000 while the transaction costs amounted to 5,499,000, resulting in net proceeds of 82,616,000.

In September 2021, the Company issued 3,989,976 shares to Eli Lilly and Company ( Lilly") pursuant to the global licensing and research collaboration between the Company and Lilly at an issue price of $ 7.52 per share, resulting in net proceeds of 23,223,000. This amount excludes a premium paid by Eli Lilly that is considered to be part of the transaction price of the licensing and research collaboration agreement (refer to note 11).

On November 4, 2021, the Company filed a shelf registration statement, which permitted the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $ 300,000,000 of its ordinary shares, warrants and/or units.

On November 4, 2021, the Company entered into a sales agreement, which permitted the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $ 75,000,000 of its ordinary shares that may be issued and sold in one or more at-the-market offerings with Cantor Fitzgerald & Co. In 2021, no shares were issued pursuant to this ATM facility.

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

Unaudited Condensed Consolidated Financial Statements

The Company operates an equity-settled share-based compensation plan, which was introduced in 2013. Options may be granted to employees, members of the Supervisory Board, members of the Management Board and consultants. The compensation expenses included in operating costs for this plan in the year ended December 31, 2021 were 6,216,000 (2020: 7,838,000), of which 3,636,000 (2020: 4,423,000) was recorded in general and administrative costs and 2,580,000 (2020: 3,415,000) was recorded in research and development costs.

In September 2021, the Company entered into a global licensing and research collaboration with Eli Lilly and Company ( Eli Lilly') focused on the discovery, development, and commercialization of potential new medicines for genetic disorders in the liver and nervous system. ProQR and Eli Lilly will use ProQR's proprietary Axiomer RNA editing platform to progress new drug targets toward clinical development and commercialization.

Under the terms of the agreement, ProQR received an upfront payment and equity consideration, and is eligible to receive milestone payments and royalties on the net sales of any resulting products. In September 2021, the Company issued 3,989,976 shares to Eli Lilly, resulting in net proceeds of 23,223,000. This amount included a price premium of 2,144,000, which was determined to be part of the transaction price and as such was initially recognized as deferred revenue. An up-front payment of 17,651,000 was received in October 2021.