From my conversations with the president of Arsenal Inc, it was because of poor sales and the desire to concentrate on the production of 7.62x39mm milled receivers over the 5.56mm milled receivers.
Yes, right now the M5's are smokin' hot because magazines are now much more available and enough people have had them and talked about them that people think "hey, I need an AK in 5.56!", but for a long time after they were introduced the did not sell well, mainly because of the magazine situation.
It's always like this though. When S&W or whoever would discontinue a model that had poor sales, then everyone scrambled to pick one up and bemoaned the fact that the company was discontinuing such a fine firearms......but they these same people didn't buy them when they were commonly available.
Send enough emails, snail mail, and phone calls their way and they might decided to continue production.