On November 13, 1999, about 0800 hours mountain standard time, a Raven RX-7 balloon, N4046M, sustained substantial damage after colliding with mountainous terrain on Thunderbird Mountain near Phoenix, Arizona. The private pilot owned and operated the balloon under the provisions of 14 CFR Part 91. The pilot and one passenger sustained minor injuries; another passenger sustained serious injuries. The personal flight departed from the juncture of Interstate 17 and Happy Valley Road about 0715. Visual meteorological conditions prevailed and no flight plan was filed. The pilot stated to the Federal Aviation Administration accident coordinator that winds were calm at departure. A passenger reported the takeoff was smooth. As the flight proceeded, the balloon approached a steep mountain and the pilot initiated a climb. He realized he was not going to clear the mountain and secured the heat prior to colliding with the ground. The balloon contacted the ground near the mountain crest, turning the gondola on its side. The balloon drifted off the other side of the mountain, the pilot reapplied heat, and flew several miles before completing an uneventful landing. A child passenger suffered a broken leg, and the gondola suffered substantial damage. The pilot failed to submit a pilot/operator report. A Safety Board form 6120.1/2 was sent certified mail and was undeliverable at the address the pilot provided.