It's hard to see from that picture, but the bike REALLY doesn't look bad at all. The chain obviously needs to go. I'm willing to bet that it has a freewheel, and NOT a freehub and cassette. A really good cleaning and oiling and the freewheel is probably salvageable. I'd be willing to bet that all you need is a whole lot of cleaning, oiling and greasing amd you'll be set.