It just need a complete restoration. Thats all.
That rear sprocket looks no good because the teeth are hooked.
If the teeth are curved it is history.
Lucky, I wouldn't say it needed a full restoration. The chain/sprockets were toast, so I replaced with NOS.
Here's the list of work completed:
Chain/Sprockets
NOS Rear Brake Shoes/Both Hubs Cleaned Up
Tank Professionally Cleaned/Lined
Carburetor Cleaned/Reassembled
Air Filter Element Replaced
Oil Changed
New Spark Plugs
Ignition Coil Rebuilt With New Plug Wire/Caps
All Grease Points Serviced
Every Cable Replaced With NOS
Throttle Grip Slide Assembly Rebuilt
Attempted To Install HondaMan Transistorized Ignition
Pretty standard stuff for a bike that had been sitting for fifteen years. It was plenty of work, and I'm glad it's done so I can enjoy the bike!