Sure. The two NAND gates are the address decoders for the output ports.
R1's address is 0xxxxxx1
R2's address is 0xxxxxx0
The other lines are control lines from the 8085 that are gated to select IO operations.
The code uses OUT instructions to write to the specified port.
So given that, which port is which and what do the LED's do as the program executes? To know that, use a pencil and paper with a register diagram of the 8085 and trace each instruction from PROGX.
The XTHL construct is tricky - hint: what does XTHL do and what is in HL after executing it and why does it need to be executed again before the RET?
Bonus question: Why is this an example of poor programming practice?