I actually have the answer to that:
they did plan on doing a sequel and started work on it, but seeing as they already had too small a budget (reason for most of the first movie taking place on Earth blech) and the movie pretty much bombed in the theaters, the project was scrapped - as a great many box-office bombs with sequel set-ups have been (super mario bros anyone?)
anyway apparently ideas from what would’ve become the sequel were reworked into the Van Damme movie “Cyborg”
quote:
"Cannon Films intended to create a sequel, which is indicated after the end credits when it is revealed that Skeletor in fact survives his fall. The idea was abandoned when Cannon wouldn’t pay for Mattel’s fees and the production used the already-made costumes and sets for the improvised action movie Cyborg. "