<PAGE>

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

               (Mark One)
              [X] Quarterly report under Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

               For Quarter Ended March 31, 2004 or

              [ ] Transition report pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934
                 For the transition period from _______to_______

                         Commission File Number 0-18261
                            TOWER PROPERTIES COMPANY
                            ------------------------
             (Exact name of registrant as specified in its charter)

       Missouri                                         (43-1529759)
       --------                                         ------------
(State of incorporation)                       (IRS Employer Identification No.)

Suite 100, 911 Main Street,            Kansas City, Missouri             64105
--------------------------------------------------------------------------------
(Address of principal executive offices)                                Zip Code

                                 (816) 421-8255
                                 --------------
              (Registrant's telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days.
Yes [X] No [ ].

     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)
Yes [ ] No [X].                                           .

     184,924 shares of common stock, $1.00 par value per share, outstanding at
April 30, 2004

<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS

                            TOWER PROPERTIES COMPANY
                                 BALANCE SHEETS
                      MARCH 31, 2004 AND DECEMBER 31, 2003

<TABLE>
<CAPTION>
                                                          (UNAUDITED)
                                                             2004               2003
                                                         -------------      -------------
<S>                                                      <C>                <C>
ASSETS
Investment in Commercial Properties:
    Rental Property, Net                                 $  92,113,491      $  92,285,745
    Tenant Leasehold Improvements, Net                       5,941,759          5,703,292
    Equipment and Furniture, Net                             6,687,222          6,892,018
    Construction in Progress                                   176,408            629,472
                                                         -------------      -------------
       Commercial Properties, Net                          104,918,880        105,510,527

Real Estate Held for Sale                                      156,717            156,717
Cash and Cash Equivalents (Related Party)                       58,682            321,517
Investment Securities at Fair Value (Related Party)          6,521,909          6,700,985
Receivables (Including Related Party)                        2,091,526          2,230,256
Income Taxes Recoverable                                       876,541            450,992
Prepaid Expenses and Other Assets                            1,256,829          1,082,808
                                                         -------------      -------------

          TOTAL ASSETS                                   $ 115,881,083      $ 116,453,802
                                                         =============      =============

LIABILITIES AND STOCKHOLDERS' INVESTMENT
Liabilities:
    Mortgage Notes Payable                               $  47,839,058      $  46,185,773
    Construction Loan (Related Party)                       12,650,000         12,650,000
    Real Estate Bond Issue                                   6,400,000          6,400,000
    Line of Credit (Related Party)                           7,288,000         10,398,000
    Accounts Payable and Other Liabilities                   2,579,983          2,398,705
    Deferred Income Taxes                                    3,921,497          3,991,337
                                                         -------------      -------------

          Total Liabilities                                 80,678,538         82,023,815

Commitments and Contingencies

Stockholders' Investment:
Preferred Stock, No Par Value
  Authorized 60,000 Shares, None Issued                             --                 --
   Common Stock, Par Value $1.00
     Authorized 1,000,000 Shares, Issued
        185,430 and 183,430 Shares in 2004 and 2003,
         respectively                                          185,430            183,430
  Paid-In Capital                                           18,920,201         18,481,720
  Retained Earnings                                         12,727,259         13,257,705
  Accumulated Other Comprehensive Income                     3,451,607          3,560,843
                                                         -------------      -------------
                                                            35,284,497         35,483,698
  Less Treasury Stock, At Cost (506 and
      6,506 shares in 2004 and 2003, respectively)             (81,952)        (1,053,711)
                                                         -------------      -------------
    Total Stockholders' Investment                          35,202,545         34,429,987
                                                         -------------      -------------

TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT           $ 115,881,083      $ 116,453,802
                                                         =============      =============
</TABLE>

               See accompanying notes to the financial statements.

                                       2
<PAGE>

                            TOWER PROPERTIES COMPANY
                              STATEMENTS OF INCOME
          FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND MARCH 31, 2003
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                               2004             2003
                                                            -----------      -----------
<S>                                                         <C>              <C>
REVENUES
Non-Related Party Revenues:
  Rent                                                      $ 4,574,188      $ 4,206,077
  Management and Service Fee                                        538              687
  Gain (Loss) on Disposition of Assets                          (20,751)         494,350
  Interest and Other Income                                      27,333          439,806
                                                            -----------      -----------
     Total Non-Related Party Revenues                         4,581,308        5,140,920

Related Party Revenues:
  Rent                                                          483,170          484,583
  Management and Service Fee                                    237,509          177,486
  Interest and Other Income                                      33,829          489,572
                                                            -----------      -----------
     Total Related Party Revenues                               754,508        1,151,641
                                                            -----------      -----------

          Total Revenues                                      5,335,816        6,292,561
                                                            -----------      -----------

OPERATING EXPENSES
  Operating Expenses                                          1,107,630          973,068
  Maintenance and Repairs                                     1,389,593          984,191
  Depreciation and Amortization                               1,447,625        1,071,512
  Taxes Other than Income                                       482,872          464,669
  General, Administrative and Other                             703,256          407,782
                                                            -----------      -----------
        Total Operating Expenses                              5,130,976        3,901,222

OTHER EXPENSE
  Interest (Including Related Party)                          1,074,421          946,708
                                                            -----------      -----------

        Income (Loss) Before Provision for Income Taxes        (869,581)       1,444,631

INCOME TAX EXPENSE (BENEFIT)                                   (339,135)         563,406
                                                            -----------      -----------

NET INCOME (LOSS)                                           $  (530,446)     $   881,225
                                                            ===========      ===========

Earnings (Loss) Per Share:
  Basic                                                     $     (3.00)     $      4.96
                                                            ===========      ===========
  Diluted                                                   $     (3.00)     $      4.95
                                                            ===========      ===========
Weighted Average Common Shares Outstanding:
  Basic                                                         177,012          177,713
                                                            ===========      ===========
  Diluted                                                       177,012          177,958
                                                            ===========      ===========
</TABLE>

                 See accompanying notes to financial statements.

                                       3
<PAGE>

                            TOWER PROPERTIES COMPANY
                       STATEMENTS OF COMPREHENSIVE INCOME
          FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND MARCH 31, 2003
                                    UNAUDITED

<TABLE>
<CAPTION>
                                                   2004           2003
                                                ---------      ---------
<S>                                             <C>            <C>
NET INCOME (LOSS)                               $(530,446)     $ 881,225

Unrealized holding loss on marketable
equity securities arising during the period      (179,076)      (356,721)

Deferred income tax benefit                        69,840        139,121
                                                ---------      ---------

Comprehensive income (loss)                     $(639,682)     $ 663,625
                                                =========      =========
</TABLE>

               See accompanying notes to the financial statements.

                                       4
<PAGE>

                            TOWER PROPERTIES COMPANY
                             STATEMENTS OF CASH FLOW
          FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND MARCH 31, 2003
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                     2004             2003
                                                                  -----------      -----------
<S>                                                               <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income (Loss)                                               $  (530,446)     $   881,225
  Adjustments to Reconcile Net Income (Loss) to Net Cash
    Provided by Operating Activities:
      Depreciation                                                  1,078,181          734,331
      Amortization                                                    369,444          337,181
      (Gain) Loss on Disposition of Assets                             20,751         (494,350)
    Change in Balance Sheet Accounts, Net:
      Accounts Receivable                                             138,730          580,094
      Prepaid Expenses and Other Assets                              (154,123)          (6,555)
      Accounts Payable and Other Liabilities                          181,278       (1,925,489)
      Current Income Taxes                                           (425,549)         563,406
                                                                  -----------      -----------
          Net Cash Provided by Operating Activities                   678,266          669,843
                                                                  -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Net Change in Construction in Progress                          $   453,064      $(5,415,279)
  Proceeds from Disposition of Assets, Net                                 --          734,200
  Additions to Equipment & Furniture, Net                            (129,690)         (56,729)
  Additions to Rental Income Property, Net                           (592,192)         (89,612)
  Additions to Leasehold Improvements, Net                           (547,952)          (1,417)
                                                                  -----------      -----------
          Net Cash Used in Investing Activities                      (816,770)      (4,828,837)
                                                                  -----------      -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Principal Payments on Mortgage Notes                            $(3,346,715)     $  (588,583)
  Proceeds from Long Term Borrowings                                5,000,000        5,863,913
  Net Change in Line of credit                                     (3,110,000)         (75,000)
  Purchase of Treasury Stock                                               --         (105,316)
  Proceeds from Exercise of Stock Options                           1,328,000               --
  Tax Benefit from Exercise of Stock Options                           84,240               --
  Deferred Loan Costs                                                 (79,856)         (13,944)
                                                                  -----------      -----------
          Net Cash Provided by (Used in) Financing Activities        (124,331)       5,081,070
                                                                  -----------      -----------
NET INCREASE (DECREASE) IN CASH                                      (262,835)         922,076

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                        321,517          282,696
                                                                  -----------      -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD                          $    58,682      $ 1,204,772
                                                                  ===========      ===========
</TABLE>

               See accompanying notes to the financial statements.

                                       5
<PAGE>

                            TOWER PROPERTIES COMPANY
                          NOTES TO FINANCIAL STATEMENTS

                                   (UNAUDITED)

1.   The financial statements included herein have been prepared by Tower
Properties Company (the Company), and in the opinion of management, present a
fair statement of the results for the interim periods. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America ("GAAP") have been condensed or omitted, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. These condensed financial statements should be read in conjunction
with the financial statements and the notes thereto included in the Company's
latest annual report on Form 10-K as of and for the year ended December 31, 2003
to provide a description of the accounting policies which have been continued
without change, and for additional information about the Company's financial
condition.

     The Company is primarily engaged in owning, developing, leasing and
managing real property located in Johnson County, Kansas, and Clay, St. Louis
and Jackson Counties in Missouri. Substantially all of the improved real estate
owned by the Company consists of office buildings, apartment complexes, a
warehouse, a warehouse/office facility, automobile parking lots and garages, and
land held for future sale or development.

2.   Interest paid during the three months of 2004 and 2003, amounted to
$1,071,050 and $1,005,909, respectively. Of those amounts, interest paid to
related party was $161,418 and $36,376 for the first three months of 2004 and
2003, respectively. Income taxes paid during the first three months of 2004 and
2003 amounted to $7,500 and $-0-, respectively.

3.   Interest of $1,728 and $54,867 was capitalized during the first three
months of 2004 and 2003, respectively.

4.   Under SFAS No. 115, the investment in Commerce Bancshares, Inc. common
stock is classified as "available for sale", and is recorded at fair value. The
unrealized gain at March 31, 2004 of $5,658,372 net of tax effects of
$2,206,765, or $3,451,607 is reflected as a separate component of equity. There
was a decrease in the net unrealized holding gain for the three months ended
March 31, 2004 of $109,236, net of deferred taxes.

                                       6
<PAGE>

5.   On March 1, 2004, the Company refinanced the loan for Peppertree Apartments
with the current lender, Thrivent Financial for Lutherans. The original
$4,000,000 loan had an outstanding balance of $2,714,631 at March 1, 2004. The
Company paid off the existing loan on March 1, 2004, paid a 5% prepayment
penalty of $136,000 and replaced the original loan with a new $5,000,000,
20-year loan at 5.89% and paid $79,856 of costs associated with the loan
closing.

6.   COMMITMENTS AND CONTINGENCIES:

         Congress passed the Americans With Disabilities Act (the Act) of 1990
which became effective January 26, 1992. The Act contains provisions for
building owners to provide persons with disabilities with accommodations and
access equal to, or similar to, that available to the general public. Management
cannot estimate the eventual impact of the Act on the financial condition or
results of operations of the Company since certain provisions of the Act are
open to interpretation. The Company is implementing the requirements of the Act
that are readily achievable and will not constitute an undue burden on the
Company.

     Due to governmental regulations regarding asbestos and the uncertainty
surrounding the advantages and disadvantages of asbestos removal, the Company
will continue to monitor the status of asbestos in its commercial office
buildings and will take appropriate action when required. The cost to remove all
asbestos from properties owned by the Company cannot be determined; however,
these removal costs could have a significant adverse impact on the future
operations and liquidity of the Company.

     A former tenant of Commerce Tower has pending a suit against the Company
relating to asbestos in that building. The suit alleges fraud, gross negligence,
nuisance and breach of contract. Plaintiff seeks to represent a class for
damages for alleged excessive rent, property damage and medical monitoring. The
suit also seeks punitive damages and an order requiring removal of the asbestos
in the building. Plaintiff originally filed suit in June 2001, then voluntarily
dismissed that suit on May 30, 2003 and immediately filed the current suit.
Monitoring performed in the building has indicated that fibers are properly
contained. The Company believes the suit is without merit and intends to defend
its position vigorously

     On March 8, 2004, the Company signed a commitment letter to finance a
15-year $12,000,000 loan at 5.56% for the Oakbrook Apartments at New Mark with
State Farm, which will replace the current $10,250,000 construction loan with
Commerce Bank. The new $12,000,000 loan with State Farm is expected to close by
May 15, 2004.

7.   EARNINGS (LOSS) PER SHARE

     Basic earnings per share is based upon the weighted average common shares
outstanding during each period. Diluted earnings per share is based upon the
weighted average common and common equivalent shares outstanding during each
period. Stock options are the Company's only common stock equivalent. The
following table presents

                                       7
<PAGE>

information necessary to calculate basic and diluted earnings per share for the
periods indicated:

<TABLE>
<CAPTION>
                                                          Quarter ended March 31,
                                                            2004          2003
                                                          -------        -------
<S>                                                       <C>            <C>
Weighted average common shares - basic                    177,012        177,713

Dilutive stock options                                          -            245
                                                          -------        -------

Weighted average common shares - dilutive                 177,012        177,958
                                                          =======        =======
</TABLE>

For the quarter ended March 31, 2004, basic and diluted earnings per share are
the same because of the net loss for the period.

8.   STOCK BASED COMPENSATION

     The Company accounts for stock options under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. No stock-based employee compensation
cost is reflected in operations, as all options granted under the plan had an
exercise price equal to the market value of the underlying common stock on the
date of grant. The following table illustrates the effect on net income (loss)
and earnings (loss) per share if the Company had applied the fair value
recognition provisions of FASB Statement No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation:

<TABLE>
<CAPTION>
                                                 Quarter ended March 31
                                              ----------------------------
                                                  2004             2003
                                              -----------        ---------
<S>                                           <C>                <C>
Net income (loss) as reported                 $  (530,446)         881,225
Deduct: Total stock-based employee
    compensation expense determined
    under fair value based method for all
    awards, net of related tax effects
                                                       --           (3,924)
                                              -----------        ---------
Pro forma net income (loss)                   $  (530,446)         877,301
                                              ===========        =========

Earnings (loss) per share:
    Basic - as reported                       $     (3.00)       $    4.96
                                              ===========        =========

    Basic - pro forma                         $     (3.00)       $    4.94
                                              ===========        =========

    Diluted - as reported                     $     (3.00)       $    4.95
                                              ===========        =========

    Diluted - pro forma                       $     (3.00)       $    4.93
                                              ===========        =========
</TABLE>

During the quarter ended March 31, 2004, the Company's Chairman of the Board
exercised stock options to acquire 8,000 shares of common stock. At March 31,
2004, there are no stock options outstanding.

                                       8
<PAGE>

9.   BUSINESS SEGMENTS

The Company groups its operations into three business segments: commercial
office, apartments, and parking. The Company's business segments are separate
business units that offer different real estate services. The accounting
policies for each segment are the same as those described in the summary of
significant accounting policies.

Following is information for each segment for three months ended March 31, 2004
and 2003:

<TABLE>
<CAPTION>
                                                                        March 31, 2004
                                       ---------------------------------------------------------------------------------
                                       COMMERCIAL                                            CORPORATE
                                         OFFICE         APARTMENTS          PARKING          AND OTHER          TOTAL
                                       ----------       ----------        ----------        ----------       -----------
<S>                                    <C>              <C>               <C>               <C>              <C>
REVENUE FROM EXTERNAL CUSTOMERS         2,276,424        1,576,941           325,661           402,282         4,581,308

REVENUE FROM RELATED PARTY/MAJOR
CUSTOMER                                  754,508               --                --                --           754,508

INTEREST EXPENSE                          477,808          441,199            41,837           113,577         1,074,421

DEPRECIATION AND AMORTIZATION             612,186          658,587            72,819           104,033         1,447,625

SEGMENT INCOME (LOSS) BEFORE TAX           83,423         (893,221)             (585)          (59,198)         (869,581)

CAPITAL EXPENDITURES BY SEGMENT           528,828          150,145            72,290            65,507           816,770

IDENTIFIABLE SEGMENT ASSETS            46,677,739       41,627,412        12,274,570        15,301,362       115,881,083
</TABLE>

<TABLE>
<CAPTION>
                                                                       March 31, 2003
                                       ---------------------------------------------------------------------------------
                                       COMMERCIAL                                           CORPORATE
                                         OFFICE         APARTMENTS         PARKING          AND OTHER           TOTAL
                                       ----------       ----------        ----------        ----------       -----------
<S>                                    <C>              <C>               <C>               <C>              <C>
REVENUE FROM EXTERNAL CUSTOMERS         2,306,877        1,472,029           288,114         1,073,900         5,140,920

REVENUE FROM RELATED PARTY/MAJOR
CUSTOMER                                1,151,641               --                --                --         1,151,641

INTEREST EXPENSE                          509,543          363,891                --            73,274           946,708

DEPRECIATION AND AMORTIZATION             544,578          314,736            26,934           185,264         1,071,512

SEGMENT INCOME (LOSS) BEFORE TAX          607,011          (75,177)           65,696           847,101         1,444,631

CAPITAL EXPENDITURES BY SEGMENT         1,146,799        3,037,075         1,375,735             3,428         5,563,037

IDENTIFIABLE SEGMENT ASSETS            45,879,878       32,678,176         8,245,219        13,429,725       100,232,998
</TABLE>

                                       9
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal assets consist of real estate holdings which are not
liquid assets. Real estate holdings include office buildings, apartment
complexes, a warehouse and a warehouse/office facility, parking facilities and
land held for future sale. The principal source of funds generated internally is
income from operations. The principal source of external funds is long-term debt
and an $18,500,000 line of credit with Commerce Bank, N.A. The Line of Credit is
collateralized by 136,699 shares of Commerce Bancshares, Inc. common stock, real
estate owned in Downtown Kansas City, MO., a negative pledge and assignment of
rents from the Commerce Tower Building, and a second deed of trust on the
Oakbrook apartments. The line of credit has been utilized by issuing a
$6,656,000 letter of credit to back a low rate Industrial Revenue Bond and a
$65,000 letter of credit required by the Company's mortgage on the Hillsborough
apartment complex. At March 31, 2004, the Company had $7,288,000 outstanding
borrowings on the line of credit. The Company had $4,491,000 available under the
line at March 31, 2004. This line of credit has been extended at market rates
and terms and management believes the Company could obtain similar financing
arrangements if the Company's relationship with Commerce Bank, N.A. did not
exist. The Company does not utilize off-balance sheet financing or leasing
transactions.

CASH PROVIDED BY OPERATING ACTIVITIES for the three months ended March 31, 2004
was $678,000, compared to $670,000 for the three months ended March 31, 2003.
There is little difference between the net cash provided by operating activities
in 2004 and 2003 because the reduction in the combination of results of
operations, gain on disposition of assets and the related change in current
income taxes account balances in 2004 compared to 2003 of $1,886,000 (see
discussion of net income in the Results of Operations section attached) is
mostly offset by the decrease in accounts payable and other liabilities account
balances in 2003 of $1,925,000. The large decrease in accounts payable and other
liabilities in 2003 reflects a reduction from payment of construction invoices
for Oakbrook apartments at New Mark and 811 Main garage expansion compared to
year-end 2002.

INVESTING ACTIVITIES used $817,000 of cash in the three months ended March 31,
2004, including $171,000 of improvements for a tenant moving into the Commerce
Tower, $125,000 for the cooling tower at the Barkley building, $71,000 for
sidewalk improvements associated with the 811 Main garage expansion, $46,000 for
work at the 9909 Lakeview warehouse, and $186,000 paid for commissions for new
leases and lease extensions.

FINANCING ACTIVITIES utilized $124,000 in the three months ended March 31, 2004.
On March 1, 2004, the Company refinanced the loan for Peppertree Apartments with
the current

                                       10
<PAGE>

lender, Thrivent Financial for Lutherans. The original $4,000,000 loan had an
outstanding balance of $2,714,631 at March 1, 2004. The Company paid off the
existing loan on March 1, 2004, paid a 5% prepayment penalty of $136,000 and
replaced the original loan with a new $5,000,000, 20-year loan at 5.89% and paid
$79,856 of costs associated with the loan closing. The $2,714,631 pay-off of the
original Peppertree loan combined with $632,084 of normal monthly payments on
other debt total $3,346,715 of principal payments on Mortgage Notes.

On March 31, 2004, Mr. James Kemper, Jr. (Chairman of the Board) exercised all
of his 8,000 non-qualified stock options to buy shares of the Company. The total
received for the 8,000 shares was $1,328,000 or an average exercise price of
$166 per share. The Company sold 6000 shares from Treasury stock for $992,000
and issued 2000 shares of stock for $336,000. The market value of the Company's
stock on exercise date was $193 per share. Therefore, the market value of 8,000
shares totaled $1,544,000 or $216,000 more than the total exercise amount of
$1,328,000. For non-qualified stock options, the difference between the market
value and exercise cost is considered income to Mr. Kemper and a tax deduction
for the Company. The Company's tax benefit of $84,240, based on a 39% effective
tax rate, was recorded as additional paid-in-capital on the balance sheet.

The Company did not experience liquidity problems during the quarter ended March
31, 2004. The Company does not anticipate any deficiencies in meeting its
liquidity needs. The availability under the $18,500,000 line of credit along
with cash provided from operations will give the Company adequate resources to
meet the Company's cash requirements during 2004. If necessary, the Company has
adequate resources to collateralize additional financing. On March 8, 2004, the
Company signed a commitment letter to refinance the Oakbrook apartments at New
Mark. A new fifteen-year loan for $12,000,000 at 5.56% with State Farm is
expected to close in the second quarter of 2004, which will replace the current
$10,250,000 construction loan with Commerce Bank and the excess cash will be
used to pay down on the line of credit. The Company had cash on hand of $59,000
at March 31, 2004.

The Company's revenues are primarily based on lease contracts, none of which are
deemed to be materially at risk.

CONTRACTUAL CASH OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

There have been no material changes to the Registrant's contractual cash
obligations and other commercial commitments from amounts disclosed in its
Annual Report on Form 10-K for the year ended December 31, 2003.

CRITICAL ACCOUNTING POLICIES

Revenue Recognition

The Company derives its revenue primarily from two sources: 1) rent from leases
of real property, and 2) management and services fees from real property leased
and managed. Rental revenue is recognized on a straight-line basis over the term
of individual non-

                                       11
<PAGE>

cancellable operating leases. The recognition of scheduled rent increases on a
straight-line basis results in the recognition of a receivable from tenants.
Such receivables were $1,386,813 and $1,049,436 at March 31, 2004 and 2003,
respectively. Lease agreements generally do not provide for contingent rents. If
amounts are received from tenants upon early termination of leases the amounts
are recorded as income when received. Management and service fees are recognized
as a percentage of revenues on managed properties as earned over the terms of
the related management agreements.

Impairment of Long-Lived Assets

The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets". The Company assesses the carrying value of its long-lived
assets whenever events or changes in circumstances indicate that the carrying
amount of the underlying asset may not be recoverable. Certain factors that may
occur and indicate that an impairment exists include, but are not limited to:
significant underperformance relative to expected projected future operating
results; significant changes in the manner of the use of the assets; and
significant adverse industry or market economic trends. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an
asset to estimated undiscounted future cash flows expected to be generated by
the asset. If the carrying amount of an asset exceeded its estimated future cash
flows, an impairment charge would be recognized by the amount by which the
carrying amount of the asset exceeds the fair value of the asset. Assets to be
disposed of would be separately presented in the balance sheet as held for sale
and reported at the lower of the carrying amount or fair value less costs to
sell, and would no longer be depreciated.

Cost Capitalization

The Company evaluates major expenditures for capitalization. Those which improve
or extend the useful life of the property are capitalized. Depreciation is based
upon the expected useful lives, generally forty years for buildings, fifteen
years for land improvements, seven years for furniture and fixtures, five years
for equipment and three years for software.

RELATED PARTY TRANSACTIONS:

The Company has a variety of related party transactions with Commerce
Bancshares, Inc. and its subsidiaries (Commerce). In addition to the line of
credit borrowing arrangement described above, the Company has the following
transactions with Commerce:

     -    Rentals - The Company leases space to Commerce Bank and its
          affiliates. Total rental income derived from these leases for the
          three months ended March 31, 2004 and March 31, 2003 was $483,170 and
          $484,583, respectively. Such leases contain lease rates and other
          provisions similar to those of other leases with unrelated parties.

     -    Management and Service fees - The Company manages certain properties
          owned by Commerce under property management agreements. In addition,
          the Company has been overseeing the construction of an office building
          in Wichita, Kansas owned by

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          Commerce. Total fees earned under these property and construction
          management agreements were $220,180 and $171,330 for the three months
          ended March 31, 2004 and March 31, 2003, respectively. The Company
          earns lease commissions on property owned by or rented by Commerce
          under a listing agreement. Total fees earned under these lease
          commissions arrangements were $17,209 and $6,156 for the three months
          ended March 31, 2004 and March 31, 2003, respectively. The Company may
          also earn income from consulting fee services. Total fees earned for
          consulting services for the three months ended March 31, 2004 were
          $120. No fees were earned for consulting services for the three months
          ended March 31, 2003. The Company provides similar services to
          unrelated parties and revenues earned under these arrangements are
          similar to those earned from other unrelated parties.

     -    Interest and other income - The Company owns 136,699 shares of
          Commerce Bancshares, Inc. common stock at March 31, 2004. The Company
          received dividend income from ownership of Commerce Bancshares common
          stock of $31,441 for the three months ended March 31, 2004. The
          Company owned 130,190 shares at March 31, 2003 and received dividend
          income of $21,481 for the three months ended March 31, 2003. In
          addition, excess funds are deposited in Commerce Bank, N.A. Interest
          income earned on such deposits aggregated $2,388 and $3,091 for the
          three months ended March 31, 2004 and March 31, 2003, respectively.
          The dividend and interest income earned are similar to those earned
          from other unrelated parties. In 2003, the Company also received
          $465,000 of other income from the Commerce Tower Building Banking
          Center Lobby lease buyout of $415,000 and Suite 618 lease buyout of
          $50,000. These lease buyouts contained rates and other provisions
          similar to those of other lease buyouts with unrelated parties.

     -    Interest expense - The Company has an $18,500,000 line of credit with
          Commerce Bank, N.A. at March 31, 2004 that has a variable interest
          rate equal to one and one half percent (1 1/2%) in excess of the Fed
          Funds rate. At March 31, 2004, $4,491,000 was available under this
          line of credit, and the interest rate at March 31, 2004 was 2.48%. The
          line requires monthly interest payments and matures June 1, 2004. The
          Company intends to renew this line of credit with Commerce upon
          expiration. Interest expense for this loan, including letter of credit
          fees, was $69,499 and $19,404 for the three months ended March 31,
          2004 and 2003, respectively. The Company pledged the shares owned of
          Commerce common stock, real estate, a negative pledge and assignment
          of rents on the Commerce Tower Building, and a second deed of trust on
          the Oakbrook apartments as collateral for the line of credit. The
          weighted average short term borrowing rate on the line of credit was
          2.50% for the three months ended March 31, 2004.

          The Company also has two construction loans with Commerce Bank, N.A.
          that total $12,650,000. The Company has a $10,250,000 construction
          loan for the development of the Oakbrook apartments with a variable
          interest rate equal to the London Interbank Offered Rate (LIBOR) plus
          1.75%. At March 31, 2004, the loan was fully drawn, and the interest
          rate at March 31, 2004 was 2.85%. At March 31, 2003, the outstanding
          balance was $5,863,914 with $4,386,086 available under the
          construction loan and the interest rate at March 31, 2003 was 3.09%.
          The loan requires monthly

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<PAGE>

          interest payments and matures February 18, 2006. Interest expense for
          this loan was $74,019 and $18,168 for the three months ended March 31,
          2004 and March 31, 2003, respectively. The Company also has a
          $2,400,000 construction loan for the expansion of the 811 Garage with
          a variable interest rate equal to the LIBOR plus 1.75%. At March 31,
          2004, the loan was fully drawn, and the interest rate at March 31,
          2004 was 2.85%. The loan requires monthly interest payments and
          matures May 1, 2006. Interest expense for this loan was $17,331 for
          the three months ended March 31, 2004.

     -    Included in receivables at March 31, 2004 and 2003 are amounts due
          from Commerce of $548,610 and $309,925, respectively.

RESULTS OF OPERATIONS

                        THREE MONTHS ENDED MARCH 31, 2004
               COMPARED WITH THE THREE MONTHS ENDED MARCH 31, 2003

Results for three months ended March 31, 2004 reflect a net loss of ($530,000),
while the comparable three months of 2003 had net income of $881,000. Pre-tax
loss in 2004 is ($869,000), which is $2,314,000 less than pre-tax profit in 2003
of $1,445,000. The decrease in pre-tax results is made up a $957,000 decrease in
Total Revenues and an increase in expenses (excluding the Provision for Income
Taxes) of $1,357,000.

The $957,000 decrease in Total Revenues is the net of several factors, including
a decrease of $868,000 in Interest and Other Income (Non-Related Party and
Related Party), a decrease of $515,000 in Gain on Sale of Assets (2003 gain of
$494,000 represents the sale of 60.04 acres of development land at New Mark to
the Catholic Diocese of KC), offset slightly by an increase in Total Rent income
(mostly Non-Related Party) of $367,000.

Interest and Other Income decreased by $868,000 mostly due to the fact that 2003
included $880,000 of revenue from lease buyouts ($465,000 in February 2003 from
Commerce Bank for Commerce Tower banking center area ($415,000) and Suite 618
($50,000) of the Commerce Tower, $133,000 in March 2003 from Ford Motor for 9909
Lakeview Warehouse, and $282,000 in March 2003 from Valentine Radford for the
8th, 9th and 11th floors of the Commerce Tower).

The increase of $367,000 in Total Rent income includes the following:

     a)   Prior to the Valentine Radford lease buy-out at the Commerce Tower in
          2003, income of $114,000 had been recorded. Also, related to the lease
          buy-out, the Company in 2003 wrote-off as a reduction in rent $327,000
          of straight-line rent. The straight-line rent represented the amount
          by which accumulated income, which had been recorded equally over the
          life of the lease, exceeded the actual amount owed in the early years
          of the lease.

     b)   Prior to the Ford Motor lease buy-out at 9909 Lakeview Warehouse in
          2003, income of $122,000 had been recorded while no rent was received
          in 2004 because the building was vacant.

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<PAGE>

     c)   Income from the UMB office building in St. Louis is up by $117,000
          mostly due to the $119,000 of rent received in 2004 from Wells Fargo
          for additional space leased that they occupied in April 2003.

     d)   The Oakbrook apartments at New Mark, which were not completed until
          late 2003 had rental income in 2004 of $160,000.

Following are comments about the expense increase of $1,357,000 (excluding the
Provision for Income Taxes). Operating expenses increased $135,000 as: a)
salaries and benefits increased by $100,000 due to normal salary increases, new
employees at the Oakbrook apartments, and an increase in health insurance
premiums of $21,000, and b) utilities expense increased $35,000 which represents
the amount of utility expense in 2004 for the new Oakbrook apartments.

Maintenance and Repairs expense has increased by $405,000. The largest factors
associated with the increase include: a) Roof and skylight repairs in 2004 of
$93,000 at the 9909 Lakeview Warehouse, b) Snow removal costs in 2004 exceeded
2003 by $51,000, c) Associated with increased leasing of the New Mark Phase I &
II apartments, repairs in 2004 exceeded 2003 by $108,000.

Depreciation and Amortization expense increased by $376,000 as 2004 includes
depreciation from the Oakbrook apartments of $292,000 and the 811 Main Garage
expansion of $50,000. These projects were put in service in late 2003.

General Administrative and Other expenses increased by $295,000 as 2004 includes
$136,000 for prepayment penalty (calculated at 5% of the loan balance) when the
loan for the Peppertree apartments was refinanced and there has been an increase
in property and liability insurance expense of $61,000.

Interest expense on the income statement reflects an increase of $128,000. Total
interest costs have actually increased by only $74,000. However, in 2004 the
Company has capitalized only $1,000 of interest related to construction
projects, while in 2003 $55,000 was capitalized, mostly from construction at the
Oakbrook apartments.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company is exposed to various market risks, including equity investment
prices and interest rates.

The Company has a significant amount of fixed rate debt and believes that the
fair value risk is best quantified by considering prepayment penalties
associated with the debt. Most prepayment penalties are based upon the
difference between the debt's fixed rate and the Treasury note rate that most
closely corresponds with the remaining life of the mortgage. The estimated
aggregate prepayment penalty on such debt was $7,907,000 at March 31, 2004.

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<PAGE>

The Company has $27,255,546 of variable rate debt as of March 31, 2004. A 100
basis point change in each debt series benchmark would impact net income on an
annual basis by approximately $166,000. This debt is not hedged.

The Company has 136,699 shares of common stock of Commerce Bancshares, Inc. with
a fair value of $6,521,909 as of March 31, 2004. This investment is not hedged
and is exposed to the risk of changing market prices. The Company classifies
these securities as "available-for-sale" for accounting purposes and marks them
to market on the balance sheet at the end of each period. Management estimates
that its investments will generally be consistent with trends and movements of
the overall stock market excluding any unusual situations. An immediate 10%
change in the market price of the securities would have a $397,836 effect on
comprehensive income.

ITEM 4.   CONTROLS AND PROCEDURES

Under the supervision and with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, the Company has evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of March 31, 2004 (the "Evaluation Date"). Based on such
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
have concluded that, as of the Evaluation Date, these controls and procedures
are effective. There have been no significant changes in the Company's internal
control over financial reporting during the Company's quarter ended March 31,
2004, that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.

PART II   OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

          A former tenant of Commerce Tower has pending a suit against the
Company relating to asbestos in that building. The suit alleges fraud, gross
negligence, nuisance and breach of contract. Plaintiff seeks to represent a
class for damages for alleged excessive rent, property damage and medical
monitoring. The suit also seeks punitive damages and an order requiring removal
of the asbestos in the building. Plaintiff originally filed suit in June 2001,
then voluntarily dismissed that suit on May 30, 2003 and immediately filed the
current suit. Monitoring performed in the building has indicated that fibers are
properly contained. The Company believes the suit is without merit and intends
to defend its position vigorously

ITEM 2.   CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
          SECURITIES

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<PAGE>

          The Company sold 8,000 shares of common stock on March 31, 2004 to
James Kemper, Jr., Chairman of the Board, for the aggregate cash consideration
of $1,328,000, pursuant to the exercise by Mr. Kemper of non-qualified stock
options. The shares were not registered under the Securities Act of 1933 (the
"Act"), but were sold pursuant to the exemption provided by Section 4(2) of the
Act. Mr. Kemper is an "accredited investor" and represented that the shares were
being acquired for investment purposes and not for resale or distribution.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          None

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None

ITEM 5.   OTHER INFORMATION

          None

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a) Exhibits

          Exhibit 31.1 - Certification of the Chief Executive Officer pursuant
          to Rule 13a-14(a) under the Securities Exchange Act of 1934

          Exhibit 31.2 - Certification of the Chief Financial Officer pursuant
          to Rule 13a-14(a) under the Securities Exchange Act of 1934

          Exhibit 32.1 - Certification of the Chief Executive Officer pursuant
          to 18 U.S.C. Section 1350

          Exhibit 32.2 - Certification of the Chief Financial Officer pursuant
          to 18 U.S.C. Section 1350

          (b) Reports on Form 8-K

No reports on Form 8-K were filed during the quarter for which this report is
filed.

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SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

TOWER PROPERTIES COMPANY

/s/ Thomas R. Willard
---------------------
Thomas R. Willard
President and Chief Executive Officer

/s/ Stanley J. Weber
--------------------
Stanley J. Weber
Chief Financial Officer

Date: May 14, 2004

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